Japanese Yen Weakens Against USD
According to FXStreet, on February 3, the Japanese Yen (JPY) depreciated against the USD, continuing to move away from its highest level in more than a month reached last week. The main reason was the market's concern about the economic impact of US President Donald Trump's new tax policy.
However, the JPY's decline was limited by expectations that the Bank of Japan (BoJ) will continue to raise interest rates. The latest BoJ report showed that policymakers are considering further rate hikes. Inflation in Tokyo rose at the fastest pace in nearly a year, reinforcing the case that the BoJ will continue to tighten monetary policy.
In addition, the narrowing interest rate gap between Japan and other countries, along with risk aversion in the market, could help the yen maintain its value and avoid further depreciation.
Rate hike expectations still give the yen an edge
President Trump recently signed an order imposing a 25% tariff on imports from Canada and Mexico, along with a 10% tariff on goods from China.
Shortly thereafter, Canadian Prime Minister Justin Trudeau, Mexican President Claudia Sheinbaum and the Chinese Foreign Ministry voiced their opposition and are expected to take countermeasures.
Meanwhile, the US dollar is rallying again, approaching its highest level in more than two years, helping the USD/JPY pair continue to rise.
The Bank of Japan also stressed that it would continue to raise interest rates if the economy and prices remained stable. However, this news did not immediately strengthen the yen.
Japanese Finance Minister Katsunobu Kato said the government will monitor the impact of Trump's new tariffs on the JPY exchange rate, as there are concerns about negative effects.
Currently, the yield spread between the US and Japan is at its lowest level in weeks, which, along with risk aversion, could help keep the Yen from depreciating too much in the near term.
Investors are looking ahead to key U.S. economic data this week, especially the ISM manufacturing PMI later today. But the focus remains on Friday’s Nonfarm Payrolls (NFP) employment report, which will have a major impact on financial markets.
According to Lao Dong's records at 12:00 on February 3, 2025, the Yen decreased to 155.708 USD/JPY, meaning 1 USD can be exchanged for about 155 JPY.
