Japanese Yen drifts lower amid BoJ uncertainty; USD/JPY rebounds from one-week low
The Japanese Yen (JPY) struggles to capitalize on gains registered against its American counterpart over the past three days and attracts fresh sellers during the Asian session on Tuesday. Investors remain uncertain about the likely timing of when the uncertainty surrounding the likely timing of when the Bank of Japan (BoJ) will hike rates again. Furthermore, reports that US President-elect Donald Trump's top economic advisers are mulling a slow ramp-up in tariffs boost investors' confidence and undermine the safe-haven JPY.
Moreover, the Federal Reserve's (Fed) hawkish shift dashed hopes for an immediate narrowing of the US-Japan yield differential and is seen as another factor acting as a headwind for the JPY. This, in turn, assists the USD/JPY pair to stall its retracement slide from a multi-month peak touched last Friday. Meanwhile, easing fears about disruptive trade tariffs under Trump 2.0 triggers a modest pullback in the US Treasury bond yields, which keeps the US Dollar (USD) below a two-year top and might cap the pair ahead of the US Producer Price Index (PPI).
Bank of Japan Deputy Governor Ryozo Himino said on Tuesday that while the direction is for further rate hikes, the central bank must carefully watch various upside and downside risks at home and abroad.Moreover, some investors are betting that the BoJ may wait until April to seek confirmation that strong wage momentum will carry over into the spring negotiations before raising interest rates again.According to a Bloomberg report on Monday, US President-elect Donald Trump’s incoming economic team is considering a program of gradual increases in import tariffs over the coming months.The proposal aimed at preventing a sudden increase in inflation triggers a modest pullback in the US Treasury bond yields and prompts some US Dollar profit-taking from over a two-year peak. Against the backdrop of the Federal Reserve's hawkish outlook, Friday's upbeat US Nonfarm Payrolls report raised doubts about the likelihood of rate cuts in 2025 and should support the USD.The yield on the benchmark 10-year US government bond retreats from a 14-month high as investors look forward to key inflation prints, starting with the Producer Price Index later today.(Cay)
Source: Fxstreet
