Created
: 2025.08.05
2025.08.05 11:33
The Japanese Yen (JPY) touched a nearly two-week high against its American counterpart following the release of the June Bank of Japan (BoJ) meeting Minutes, which reaffirmed bets for an imminent interest rate hike by the year-end. Adding to this, an upward revision of Japan's Services PMI turns out to be another factor that provided a modest lift to the JPY during the Asian session on Tuesday. The JPY, however, struggles to attract any follow-through buying amid concerns that domestic political uncertainty and signs of cooling inflation in Japan could complicate the BoJ's policy normalization path.
Adding to this, the upbeat market mood contributes to capping the safe-haven JPY. This, along with the emergence of some US Dollar (USD) buying, assists the USD/JPY pair to rebound around 35-40 pips from the daily trough and climb back above the 147.00 mark in the last hour. Meanwhile, traders are pricing in a greater chance that the Federal Reserve (Fed) will cut interest rates in September. This marks a significant divergence from hawkish BoJ expectations and should act as a tailwind for the lower-yielding JPY. Moreover, rising Fed rate cut bets should cap the USD and the currency pair.
From a technical perspective, spot prices showed some resilience below the 50% retracement level of the rally from the July swing low, and the subsequent move back above the 147.00 mark warrants caution for the USD/JPY bears. Meanwhile, neutral oscillators on the daily chart suggest that any further recovery is more likely to confront an immediate hurdle near the 147.35 area ahead of the 147.75 region, or the 38.2% Fibonacci retracement level and the 148.00 round figure. A sustained strength beyond the latter will suggest that the USD/JPY pair has formed a near-term bottom and shift the bias in favor of bullish traders.
On the flip side, the 50% retracement level, around the 146.85 region, now seems to act as an immediate support. Some follow-through selling below the Asian session low, around the 146.60 area, could make the USD/JPY pair vulnerable to accelerate the fall towards the 146.00 mark. The downward trajectory could extend further and eventually drag spot prices to the 145.85 zone, or the 61.8% Fibo. retracement level.
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
: 2025.08.05
Last updated
: 2025.08.05
FXStreet is a forex information website, delivering market analysis and news articles 24/7.
It features a number of articles contributed by well-known analysts, in addition to the ones by its editorial team.
Founded in 2000 by Francesc Riverola, a Spanish economist, it has grown to become a world-renowned information website.
We hope you find this article useful. Any comments or suggestions will be greatly appreciated.
We are also looking for writers with extensive experience in forex and crypto to join us.
please contact us at [email protected].
Disclaimer:
All information and content provided on this website is provided for informational purposes only and is not intended to solicit any investment. Although all efforts are made in order to ensure that the information is correct, no guarantee is provided for the accuracy of any content on this website. Any decision made shall be the responsibility of the investor and Myforex does not take any responsibility whatsoever regarding the use of any information provided herein.
The content provided on this website belongs to Myforex and, where stated, the relevant licensors. All rights are reserved by Myforex and the relevant licensors, and no content of this website, whether in full or in part, shall be copied or displayed elsewhere without the explicit written permission of the relevant copyright holder. If you wish to use any part of the content provided on this website, please ensure that you contact Myforex.
Myforex uses cookies to improve the convenience and functionality of this website. This website may include cookies not only by us but also by third parties (advertisers, log analysts, etc.) for the purpose of tracking the activities of users. Cookie policy