Japanese Yen builds on steady intraday ascent
The Japanese (JPY) attracts fresh buyers following an Asian session downtick on Tuesday, which, along with subdued US Dollar (USD) price action, drags the USD/JPY pair to a nearly two-week low, around the 144.60 area in the last hour. Investors seem convinced that the Bank of Japan (BoJ) will hike interest rates again in 2025, which, in turn, is seen as a key factor behind the JPY's relative outperformance. The USD, on the other hand, struggles to lure buyers amid bets that the Federal Reserve (Fed) will lower borrowing costs further.
Meanwhile, a surprise downgrade of the US government's credit rating on Friday appeared to have a modest impact on the global risk sentiment. This is evident from a generally positive tone around the equity markets, which might keep a lid on any further gains for the safe-haven JPY and act as a tailwind for the USD/JPY pair. Nevertheless, the fundamental backdrop seems tilted in favor of the JPY bulls and suggests that the path of least resistance for the currency pair is to the downside as traders look to the Fedspeak for a fresh impetus.
Bank of Japan Deputy Governor Shinichi Uchida said on Monday that Japan's underlying inflation is likely to re-accelerate after a period of slowdown and that the central bank will keep raising interest rates if the economy, prices improve as projected.
Moreover, the BoJ's Summary of Opinions from the last meeting revealed that policymakers haven't given up on hiking interest rates further, and some board members saw scope to resume rate hikes if developments over US tariffs stabilise.
Japan's Finance Minister Katsunobu Kato hinted at plans to speak with US Treasury Secretary Bessent on FX at the G7 finance leaders’ meeting later this week. However, Kyodo News reported that Bessent, is not expected to attend the meeting.
Source: Fxstreet
