Created
: 2025.07.30
2025.07.30 22:45
Following the bearish action seen earlier in the day, USD/JPY regains its traction and trades at a fresh two-week high at around 149.00 in the American session on Wednesday.
The data from the US showed that employment in the private sector rose by 104,000 in July. This reading followed the 23,000 decrease recorded in June and came in better than the market expectation for an increase of 78,000.
Additionally, the US Bureau of Economic Analysis reported in its first estimate that the US' Gross Domestic Product (GDP) grew at an annual rate of 3% in the second quarter, beating analysts' estimate for an expansion of 2.4%.
Reflecting the positive impact of these data releases on the US Dollar's (USD) valuation, the USD Index was last seen trading at its highest level since late May at 99.52, rising 0.63% on the day.
Later in the session, the Federal Reserve (Fed) will announce monetary policy decisions. The Fed is widely anticipated to leave the policy rate unchanged after the July meeting. The statement language and comments from Chairman Jerome Powell will be scrutinized by investors. According to the CME FedWatch Tool, markets are currently pricing in about 60% probability of a 25 basis points rate cut in September.
The Japanese Yen (JPY) is one of the world's most traded currencies. Its value is broadly determined by the performance of the Japanese economy, but more specifically by the Bank of Japan's policy, the differential between Japanese and US bond yields, or risk sentiment among traders, among other factors.
One of the Bank of Japan's mandates is currency control, so its moves are key for the Yen. The BoJ has directly intervened in currency markets sometimes, generally to lower the value of the Yen, although it refrains from doing it often due to political concerns of its main trading partners. The BoJ ultra-loose monetary policy between 2013 and 2024 caused the Yen to depreciate against its main currency peers due to an increasing policy divergence between the Bank of Japan and other main central banks. More recently, the gradually unwinding of this ultra-loose policy has given some support to the Yen.
Over the last decade, the BoJ's stance of sticking to ultra-loose monetary policy has led to a widening policy divergence with other central banks, particularly with the US Federal Reserve. This supported a widening of the differential between the 10-year US and Japanese bonds, which favored the US Dollar against the Japanese Yen. The BoJ decision in 2024 to gradually abandon the ultra-loose policy, coupled with interest-rate cuts in other major central banks, is narrowing this differential.
The Japanese Yen is often seen as a safe-haven investment. This means that in times of market stress, investors are more likely to put their money in the Japanese currency due to its supposed reliability and stability. Turbulent times are likely to strengthen the Yen's value against other currencies seen as more risky to invest in.
Created
: 2025.07.30
Last updated
: 2025.07.30
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