The Japanese yen rose in Asian markets on Tuesday against a basket of major and minor currencies, moving away from a four-month low against the US dollar, supported by relatively low-level buying activity. After Bank of Japan Governor Kazuo Ueda failed to provide clear signals on the possibility of raising interest rates in December, markets are awaiting more economic data from Tokyo to gauge the feasibility of a third rate hike this year. The current rise in the Japanese currency is supported by a slowdown in long-term US Treasury yields. This comes at a time when markets are waiting to see who Donald Trump will choose to fill the position of the new US Treasury Secretary.
Price overview
The Japanese yen exchange rate today recorded a decline of 0.45% against the dollar to reach (153.95 yen), after opening trading today at (154.65 yen), while recording a high of (154.65 yen). The Japanese yen ended trading on Monday down 0.25% against the US dollar, resuming its losses that stopped on Friday as part of recovery operations from its lowest level in four months at 156.74 yen. These losses are attributed to less hawkish comments from Bank of Japan Governor Kazuo Ueda, which increased uncertainty about the timing of raising Japanese interest rates.
Japanese interest
Bank of Japan Governor Kazuo Ueda reiterated on Monday that the central bank will continue to raise interest rates if economic developments and prices move in line with his expectations. But he did not specify whether a rate hike is possible in December. Following the comments, the pricing of a quarter-point rate hike by the BOJ at its Dec. 19 meeting remained unchanged at 54 percent. Investors are awaiting more Japanese data on inflation, wages and unemployment over the coming month to gauge the likelihood of a rate hike.
US bond yield
The yield on the 10-year US Treasury note fell 0.4% on Tuesday, extending losses for a second straight session, away from a six-month high of 4.505%. The decline reduces investment opportunities in the US dollar. Separately, markets are awaiting Donald Trump’s announcement of his choice for the new US Treasury Secretary. Media reports have indicated that the list of potential candidates includes former Federal Reserve Governor Kevin Warsh and billionaire CEO Mark Rowan. “Markets are watching the appointments and want to make sure that the next Treasury Secretary supports tariff policies,” said Marc Chandler, chief market strategist at Bankburn Global Forex in New York.
Japanese Yen Performance Forecast
“The recent weakness in the yen had many market participants expecting Ueda to be more hawkish, but he stuck to his previous narrative,” said Rodrigo Catril, chief foreign exchange strategist at National Australia Bank. “We believe that the economy and price pressures are a strong case for a December rate hike, but the decision will depend largely on political reactions, especially as the Liberal Democratic Party seeks to regain popular support after its poor showing in the recent lower house elections,” Catril added. “The decision on Japan’s rate hike will depend in part on the dollar/yen movement. If the pair rises to around 160 yen, I think that will increase the chances of a rate hike,” said IG market analyst Tony Sycamore. “Ueda probably wouldn’t mind keeping the dollar/yen around 150 to 152 yen,” Sycamore added. “That level could push him to delay any decision until next year. But a rate hike is definitely coming, it’s just a matter of timing, especially as the Japanese economy is in a good position.”
