- The Japanese Yen begins the week with limited movement, influenced by a combination of fundamental factors.
- Reduced confidence in a swift resolution to US-China trade tensions provides some backing for the safe-haven JPY.
- Anticipation that the BoJ might halt further interest rate increases is keeping JPY buyers at bay.
The Japanese Yen (JPY) is trading within a tight range as the week commences, hovering near a two-week low against the US Dollar reached last Friday. Uncertainties surrounding the US and China are dampening prospects for a rapid conclusion to their trade dispute, which, in turn, is bolstering the safe-haven appeal of the JPY. Furthermore, the possibility of Japan securing a trade agreement with the US is providing additional support to the JPY.
Concurrently, market participants are lowering their expectations for an imminent interest rate increase by the Bank of Japan (BoJ), as growing economic threats from US tariffs overshadow indications of widening inflation within Japan. This is preventing JPY bulls from making substantial investments, and together with a slight strengthening of the US Dollar (USD), is creating a favorable environment for the USD/JPY pair. Nevertheless, the contrasting policy outlooks of the BoJ and the Federal Reserve (Fed) should limit the USD’s advance and favor the lower-yielding JPY.
