USD/JPY remains subdued near 153.50 due to safe-haven demand

• USD/JPY depreciates as the Japanese Yen gains on increased safe-haven demand.
• Japan's Finance Minister Satsuki Katayama reaffirmed that authorities are closely monitoring FX volatility and cautioned against sharp, one-sided movements.
• The US Dollar faces challenges amid the ongoing US government shutdown.

USD/JPY extends its losses for the second consecutive day, trading around 153.50 during the Asian hours on Wednesday. The pair depreciates as the Japanese Yen (JPY) gains ground amid increased safe-haven demand, driven by a global selloff in risk assets.

Global stocks and other risk assets fell under pressure as worries grew over inflated AI valuations. The risk aversion increases after warnings from major Wall Street bank CEOs about potential market pullbacks.

Additionally, JPY receives support from renewed verbal intervention, as Finance Minister Satsuki Katayama reiterated that authorities are closely watching FX volatility and warned against sharp, one-sided moves. Meanwhile, Prime Minister Sanae Takaichi said Japan has not yet achieved sustainable inflation supported by wage growth, suggesting a cautious stance on further rate hikes.

The USD/JPY pair also loses ground as the US Dollar (USD) loses some ground after five days of gains, driven by the ongoing US government shutdown. Traders adopt caution as the deadlock has now entered its sixth week and is poised to become the longest federal funding lapse in US history after the Senate once again failed to pass a short-term funding bill. The most recent attempt to resolve the standoff, Republican-backed temporary legislation, was rejected by the Senate for the 14th time on Tuesday.

The US Dollar may regain its ground due to the cautious sentiment surrounding the US Federal Reserve (Fed) policy stance for December. Fed Chair Jerome Powell stated during last week's post-meeting press conference that another rate cut in December remains uncertain. Powell also cautioned that policymakers might need to adopt a wait-and-see stance until the release of new official data resumes.