USD/JPY tumbles below 145.00 as Moody's downgrade weighs on the US Dollar

• Japanese Yen extends winning streak to five consecutive days against the US Dollar amid risk-off flows.
• Moody's cuts US credit rating, weighing heavily in the US Dollar with the DXY index heading to 100.00.
• BoJ signals more rate hikes if recovery stays on track.

The Japanese Yen (JPY) extends its winning streak against the US Dollar (USD) into a fifth consecutive day on Monday, with USD/JPY falling below the 145.00 psychological mark to trade near 144.70 during the European session, driven by broad-based USD weakness and fresh hawkish signals from the Bank of Japan (BoJ).

Late Friday, Moody's Ratings cut the US long-term credit rating by one notch -- to "Aa1" from "Aaa" -- citing persistent concerns over the country's mounting fiscal deficit and ballooning debt, which recently crossed the $36 trillion mark.

"Successive US administrations and Congress have failed to agree on measures to reverse the trend of large annual fiscal deficits and growing interest costs," said Moody's in the report.

Despite the downgrade, US Treasury Secretary Scott Bessent played down its significance, saying in an interview with CNN, "I don't put much credence in Moody's," reflecting the administration's continued confidence in the resilience of the US economy.

The downgrade weighed heavily on the Greenback, pushing the US Dollar Index (DXY) near the key 100.00 mark, reinforcing bearish sentiment across major USD pairs.

Meanwhile, the Japanese Yen draws support from hawkish remarks by BoJ Deputy Governor Shinichi Uchida. Speaking to parliament, Uchida said the BoJ will continue to raise interest rates if the economy rebounds from the expected impact of US tariffs.

"If our forecast materializes, we will continue to raise our policy rate," Uchida stated. However, he warned that the outlook remains clouded by "extremely high uncertainty" surrounding global trade policy and its broader economic impact. "We will determine without pre-conception whether the economy and prices move in line with our forecast," he added, according to Reuters.

Uchida's comments reinforce the BoJ's cautious but hawkish bias, contrasting sharply with the growing dovish tilt in US monetary policy expectations. The Japanese Yen has gained traction in recent days as investors reassess the US macro outlook following Moody's credit rating downgrade.

Looking ahead today, traders will closely monitor speeches from Federal Reserve (Fed) officials, including New York Fed President John Williams, for insights into the central bank's policy outlook. On the Japanese front, the Ministry of Finance is set to release trade balance data on Wednesday, and the Statistics Bureau will publish the Consumer Price Index (CPI) on Friday.