- The Japanese Yen retreated slightly from a maximum of several months reached in front of the USD on Monday.
- Concerns about the commercial war, the fears of global recession and bets for an increase in Boj rates should limit deeper losses of the JPY.
- Trump’s threat to the independence of the Fed could limit any significant rebound for the USD/JPY torque.
The Japanese Yen (JPY) slides during the Asian session on Tuesday in the midst of the decrease in the hopes of a rapid commercial agreement between the US and Japan. In addition, the stability signs in the markets of Asian shares and a modest rebound in the future of US indexes undermine the safe refuge jpy. This, together with a modest rebound of the US dollar (USD) from a minimum of three years reached on Monday, elevates the USD/JPY torque again above the round of 141.00.
Meanwhile, investors are still concerned about the possible economic repercussions of the aggressive tariff policies of the US president, Donald Trump. This, together with the concern that a total commercial war would trigger a global recession, could maintain a limit to any optimism in the markets and act as a tail wind for the JPY. In addition, bets that the Bank of Japan (BOJ) will raise interest rates even more in 2025 should contribute to limit deepest losses of the JPY.
The Japanese Yen bundles become caution before the decrease in the hopes of a commercial agreement between the US and Japan; The descent seems to be damping
- After the first negotiations between Japan and the US last week, the Minister of Economic Revitalization of Japan, Ryosei Akazawa, said that any agreement will probably take time, since it is difficult to say how long it will take to close the gap between both parties.
- Akazawa added that agriculture will not compromise to protect the automotive industry in the US tariff conversations Meanwhile, Japan finance minister Katsunobu Kato will meet with US Treasury Secretary, Scott Besent, later this week to discuss change rates.
- Investors remain in tension in the face of uncertainty about the high tariffs of Donald Trump and the effect of the erratic commercial war on the global economy. In addition, Trump’s new attack on the president of the Federal Reserve, Jerome Powell, shook the markets.
- Trump accused Powell not to act quick enough to reduce interest rates. Powell said last week that the Central Bank was not inclined to cut interest rates in the near future before the possible inflationary pressures derived from the new tariffs.
- Meanwhile, the Economic Advisor of the White House, Kevin Hasett, has suggested that Trump and his team are studying if they could fire Powell. This generates doubts about the independence of the Central Bank and keeps the US dollar bundles defensive.
- It is reported that the Bank of Japan plans to point out next week that there is almost no need to change its basic position on the increase in interest rates, since the potential impact of US tariffs will not interrupt the current cycle of salary growth and inflation.
- This marks a great divergence compared to the expectations that the Fed resumes its cycle of feat cuts in June and reduces indebtedness costs at a complete percentage point by the end of this year. This should further benefit the low -performance JPY.
- The operators now expect the publication of the US Richmond manufacturing index. Later on Tuesday. This, together with the Speeches of influential members of the FOMC, will boost the USD and will provide a short -term impetus to the USD/JPY torque.
- Attention will then focus on the Global Preliminary PMI on Wednesday, which will offer a new vision of global economic health. Apart from this, trade related developments will play a key role in determining the market feeling and JPY demand.
The USD/JPY needs to overcome the immediate barrier of 141.60-141.65 to support the perspectives of any additional recovery
From a technical perspective, the Relative Force Index (RSI) is slightly oversized daily is braking operators to open new bearish positions around the USD/JPY torque. However, any upward movement will probably face a strong resistance near the horizontal support break of 141.65-141.60. That said, a sustained strength above could trigger a short coverage rally and raise cash prices beyond the round figure of 142.00, towards the next relevant obstacle near the region of 142.35-142.40.
On the contrary, the 140.45 area, or the minimum of several months reached on Monday, now seems to protect the immediate descent, below which the USD/JPY torque could accelerate the fall towards the psychological brand of 140.00. The descending trajectory could extend even more towards challenging the annual minimum of 2024, around the region of 139.60-139.55.
And in Japanese faqs
The Japanese Yen (JPY) is one of the most negotiated currencies in the world. Its value is determined in general by the march of the Japanese economy, but more specifically by the policy of the Bank of Japan, the differential between the yields of the Japanese and American bonds or the feeling of risk among the operators, among other factors.
One of the mandates of the Bank of Japan is the currency control, so its movements are key to the YEN. The BOJ has intervened directly in the currency markets sometimes, generally to lower the value of YEN, although it abstains often due to the political concerns of its main commercial partners. The current ultralaxy monetary policy of the BOJ, based on mass stimuli to the economy, has caused the depreciation of the Yen in front of its main monetary peers. This process has been more recently exacerbated due to a growing divergence of policies between the Bank of Japan and other main central banks, which have chosen to abruptly increase interest rates to fight against inflation levels of decades.
The position of the Bank of Japan to maintain an ultralaxa monetary policy has caused an increase in political divergence with other central banks, particularly with the US Federal Reserve. This favors the expansion of the differential between the American and Japanese bonds to 10 years, which favors the dollar against Yen.
The Japanese Yen is usually considered a safe shelter investment. This means that in times of tension in markets, investors are more likely to put their money in the Japanese currency due to their supposed reliability and stability. In turbulent times, the Yen is likely to be revalued in front of other currencies in which it is considered more risky to invest.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
