Select Language

Japanese Yen slides to nearly one-week low against rebounding USD; downside seems limited

Breaking news

Japanese Yen slides to nearly one-week low against rebounding USD; downside seems limited

  • X
  • facebook
  • LINE
  • RSS

  • X
  • facebook
  • LINE
  • RSS
New update 2025.09.02 11:35
Japanese Yen slides to nearly one-week low against rebounding USD; downside seems limited

update 2025.09.02 11:35

  • The Japanese Yen drifts lower for the third straight day amid the BoJ rate hike uncertainty.
  • A modest USD rebound contributes to the USD/JPY pair's positive move to a multi-day high.
  • The divergent BoJ-Fed policy expectations might cap the pair ahead of key US macro data.

The Japanese Yen (JPY) trades with a negative bias for the third consecutive day against a rebounding US Dollar (USD), lifting the USD/JPY pair to a nearly one-week high, around the 147.65 area during the Asian session on Tuesday. The uncertainty over the likely timing of the next interest rate hike by the Bank of Japan (BoJ) is seen as a key factor undermining the JPY. That said, investors seem convinced that the BoJ will stick to its policy normalization path, which in turn warrants some caution before positioning for any further JPY depreciation.

Apart from this, the cautious market mood and escalating geopolitical tensions might contribute to limiting losses for the safe-haven JPY. The USD, on the other hand, might struggle to attract any meaningful buyers amid bets that the Federal Reserve (Fed) will lower borrowing costs in September and deliver at least two rate cuts by the year-end. The outlook marks a significant divergence in comparison to hawkish BoJ expectations and should help limit deeper losses for the lower-yielding JPY, which, in turn, might keep a lid on the USD/JPY pair.

Japanese Yen drifts lower amid the uncertainty over the likely timing of the next BoJ rate hike

  • Asian stocks posted modest gains at the open on Tuesday amid a surge in China's CSI 300 Index, which contributes to the safe-haven Japanese Yen's underperformance against its American counterpart for the third straight day.
  • Capital Spending data released from Japan on Monday indicated a pickup in business investments in the second quarter. This could bolster the labour market and demand-driven inflation, reaffirming Bank of Japan rate hike bets.
  • In contrast, traders are pricing in a nearly 90% chance that the Federal Reserve will lower borrowing costs by 25 basis points in September, which marks a significant divergence in comparison to hawkish BoJ expectations.
  • Moreover, market participants see a greater chance that the US central bank will cut interest rates twice by the end of this year. This, along with concerns about the Fed's independence, keeps the US Dollar bulls on the defensive.
  • US Treasury Secretary Scott Bessent, speaking during a Reuters interview, defended President Donald Trump's removal of Fed Governor Lisa Cook and argued that allegations of mortgage fraud against her warranted scrutiny.
  • Cook, however, refused to step down and has filed a lawsuit. Meanwhile, Cook's departure would give Trump another appointment to the Fed's seven-member board and command a majority for the first time in decades.
  • Moreover, Trump has repeatedly criticized Fed Chair Jerome Powell for not cutting rates more aggressively. Nevertheless, the development has raised concerns about the central bank's autonomy and could weigh on the USD.
  • A busy week of important US macro releases scheduled at the start of a new month kicks off with the ISM Manufacturing PMI, which might influence the USD price dynamics and influence the USD/JPY pair later this Tuesday.
  • Investors will also confront the release of the US JOLTS Job Openings on Wednesday, followed by the ADP report on private-sector employment and ISM Services PMI on Thursday, and the Nonfarm Payrolls (NFP) report on Friday.

USD/JPY is more likely to attract fresh sellers and remain capped near the 148.00 round figure

From a technical perspective, the USD/JPY pair's move up over the past three days validates a support marked by the lower boundary of a four-week-old trading range, around the 146.70 region. The said area should act as a key pivotal point, which, if broken decisively, could drag spot prices to the August swing low, around the 146.20 area, en route to the 146.00 mark. Some follow-through selling will be seen as a fresh trigger for bearish traders and pave the way for deeper losses.

On the flip side, any further move up could attract fresh sellers and remain capped ahead of the 148.00 round figure, which represents the top end of the multi-week-old trading band. A sustained strength beyond could prompt a short-covering rally towards the recent swing high, around the 148.75-148.80 region. The latter nears the 200-day Simple Moving Average (SMA). Hence, some follow-through buying might shift the near-term bias in favor of the USD/JPY bulls.

Bank of Japan FAQs

The Bank of Japan (BoJ) is the Japanese central bank, which sets monetary policy in the country. Its mandate is to issue banknotes and carry out currency and monetary control to ensure price stability, which means an inflation target of around 2%.

The Bank of Japan embarked in an ultra-loose monetary policy in 2013 in order to stimulate the economy and fuel inflation amid a low-inflationary environment. The bank's policy is based on Quantitative and Qualitative Easing (QQE), or printing notes to buy assets such as government or corporate bonds to provide liquidity. In 2016, the bank doubled down on its strategy and further loosened policy by first introducing negative interest rates and then directly controlling the yield of its 10-year government bonds. In March 2024, the BoJ lifted interest rates, effectively retreating from the ultra-loose monetary policy stance.

The Bank's massive stimulus caused the Yen to depreciate against its main currency peers. This process exacerbated in 2022 and 2023 due to an increasing policy divergence between the Bank of Japan and other main central banks, which opted to increase interest rates sharply to fight decades-high levels of inflation. The BoJ's policy led to a widening differential with other currencies, dragging down the value of the Yen. This trend partly reversed in 2024, when the BoJ decided to abandon its ultra-loose policy stance.

A weaker Yen and the spike in global energy prices led to an increase in Japanese inflation, which exceeded the BoJ's 2% target. The prospect of rising salaries in the country - a key element fuelling inflation - also contributed to the move.


Date

Created

 : 2025.09.02

Update

Last updated

 : 2025.09.02

Related articles


Show more

FXStreet

Financial media

arrow
FXStreet

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.

Was this article helpful?

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].

Thank you for your feedback.
Thank you for your feedback.

Most viewed

Silver Price Forecast: XAG/USD trades around $40.50 after breaking below 14-year highs

Silver price (XAG/USD) halts its five-day winning streak, trading around $40.30 per troy ounce during the European hours after retreating from $40.85, the highest since September 2011, reached on Tuesday.
New
update2025.09.02 18:00

ISM Manufacturing PMI expected to improve slightly in August, but remain in contraction

The Institute for Supply Management (ISM) is scheduled to release the August Manufacturing Purchasing Index this Tuesday. The index is a trusted measure of the health of the United States (US) manufacturing sector, closely followed by market players.
New
update2025.09.02 18:00

ECB's Simkus: No reason to adjust rates now

European Central Bank (ECB) Governing Council member Gediminas Šimkus said on Tuesday that there is "no reason to adjust rates now."
New
update2025.09.02 17:59

TTF Gas prices climb as Norwegian flows drop - ING

European natural Gas prices edged higher as Norwegian supply disruptions intensified, with extended maintenance at the Troll field cutting flows to Europe.
New
update2025.09.02 17:57

EUR/USD: Political risk premium misplaced - OCBC

Euro (EUR) slipped modestly but still traded near recent highs of 1.17 levels. Pair was last at 1.1650, OCBC's FX analysts Frances Cheung and Christopher Wong note.
New
update2025.09.02 17:53

EUR: Much ado about CPI - ING

There seems to be quite a lot of focus on the August eurozone CPI release today. Consensus expects headline to tick up to 2.1% YoY and core to tick down to 2.2% YoY, ING's FX analyst Chris Turner notes.
New
update2025.09.02 17:50

Attention set to turn to OPEC+ - ING

ICE Brent edged higher yesterday, breaking back above $68/bbl and settling just shy of 1% higher on the day. Yet the upward move came amid thin volumes due to the Labour Day holiday in the US, ING's commodity experts Ewa Manthey and Warren Patterson note.
New
update2025.09.02 17:46

Gold: Watch price action - OCBC

Prices of precious metals - Gold and silver pushed through recent highs on prospects of Fed cutting rates soon. Gold last seen at 3479 levels, OCBC's FX analysts Frances Cheung and Christopher Wong note.
New
update2025.09.02 17:44

USD/CAD Price Forecast: Challenges EMAs resistance in a bid to reach 1.3800

USD/CAD continues to gain ground for the second successive session, trading around 1.3780 during the European hours on Tuesday. The technical analysis of the daily chart suggests that the pair moves sideways within a rectangular pattern, suggesting a consolidation phase.
New
update2025.09.02 17:28

NZD/USD Price Forecast: Slumps to near 0.5850 as 20-day EMA remains key barrier

The NZD/USD pair is down 0.8% to near 0.5850 during the European trading session on Tuesday. The Kiwi pair tumbles as the US Dollar (USD) strengthens ahead of the opening of United States (US) markets after an extended weekend.
New
update2025.09.02 17:26

Disclaimer:arw

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.

  • Facebook
  • Twitter
  • LINE

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

I agree
share
Share
Cancel