On March 7, the Japanese Yen (JPY) continued to increase against the US Dollar (USD), keeping the USD/JPY pair near its lowest level since the beginning of October. The main reason is that the market expects the Bank of Japan (BoJ) to continue raising interest rates. This has increased the yield on Japanese government bonds (JGB), narrowing the interest rate gap between Japan and other countries, thereby making the Yen stronger.
In addition, uncertainty over former President Donald Trump's trade policy and its impacts on the global economy has cautiously made investor sentiment. Global stocks fell, causing investors to seek safe-haven assets such as the Yen. However, the market is still waiting for US employment data ( Non-farm payrolls - NFP), so the downward pressure on USD/JPY is somewhat limited.
Expectations of the BoJ's "hawl" policy and trade tensions support the Japanese Yen
BoJ Deputy Governor Shinichi Uchida said the central bank could raise interest rates at a pace in line with market expectations. In addition, Japanese government bond yields for the 10-year period have risen to their highest level since 2009 due to global bond sell-offs. This continues to help the Yen strengthen.
Meanwhile, investors are still waiting for more information about President Donald Trump's trade policies, especially after he suddenly changed his decision on tariffs on Canada and Mexico. Mr. Trump has just announced a 25% one-month exemption for goods from these two countries, as long as they meet the provisions of the USMCA Agreement.
Many people are concerned that Mr. Trump's tariff policies could slow down the US economy. This further raises expectations that the US Federal Reserve (Fed) will soon cut interest rates, possibly as early as in May.
Philadelphia Fed President Patrick Harker warned that the US economy is still stable but there are signs of tensions in the consumer sector and inflation risks. This partly overshadowed recent positive employment data, when the number of unemployment claims fell to 221,000 in the first week of March - lower than expected.
Atlanta Fed President Raphael Bostic said the US economy is in a period of strong fluctuations and it is not clear where everything will go. Meanwhile, a Fed board member Christopher Waller said he opposed a rate cut in March, but if inflation continues to fall, a rate cut this year could still happen.
Currently, the market is hardly expecting the Fed to cut interest rates in March, but is still divided about the May meeting. However, many believe that the Fed may start cutting interest rates from June and continue to cut them in September.
The market's focus now is the US National Employment Report (NFP), which is expected to show the economy created 160,000 new jobs in February, while the unemployment rate remained at 4%.
According to Lao Dong, at 12:00 on March 7, 2025, the Yen exchange rate is currently anchored around 147.603 JPY/USD, the Yen increased by about 0.25%.
