USD/JPY ticks lower to near 151.90 despite some strength in US Dollar
19.02.2025, 13:23

USD/JPY ticks lower to near 151.90 despite some strength in US Dollar

  • USD/JPY falls slightly even though the US Dollar trades higher, which indicates strength in the Japanese Yen (JPY).
  • President Trump threatens to impose 25% tariffs on automobiles, semiconductors and pharmaceuticals.
  • Investors await the FOMC minutes and Japan’s National CPI data for January.

The USD/JPY pair edges lower to near 151.90 in Wednesday’s North American session. The asset ticks lower even though the US Dollar (USD) trades higher, with the US Dollar Index (DXY) rising to near 107.20.

The Greenback gains as the market sentiment has turned slightly cautious due to tariff threats from United States (US) President Donald Trump. On Tuesday, Donald Trump threatened to impose 25% tariffs on imports of foreign cars, pharmaceuticals, and semiconductors. Trump didn’t provide any timeframe with intensions to allow local manufacturers to increase operating capacity.

Market participants expect Germany, Japan, South Korea, Taiwan, and India would be major casualties of Trump’s latest tariff threat.

Meanwhile, investors await Federal Open Market Committee (FOMC) minutes for the January meeting, which will be published at 19:00 GMT. In the January meeting, the Fed announced a pause in its monetary expansion cycle after cutting interest rates by 100 basis points (bps) in the last three meetings of 2024. Fed Chair Jerome Powell guided that monetary policy adjustments would become appropriate on when officials will see “real progress in inflation or at least some weakness in the labor market”.

On the Japan front, market participants will focus on the National Consumer Price Index (CPI) data for January, which will be released on Thursday. Economists expect the National CPU ex. Fresh Food to have accelerated to 3.1% from 3% in December. Hot inflation data would boost market expectations that the Bank of Japan (BoJ) will raise interest rates again this year.

Japanese Yen FAQs

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.

 

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