The Japanese yen strengthened to around 155.6 per dollar on Monday, continuing its upward momentum from the previous two weeks, following hawkish signals from the Bank of Japan (BOJ).
Yen gains on BOJ hike, trade tensions
On Friday, the BOJ raised interest rates by 25 basis points to 0.5%, marking the highest short-term borrowing costs in 16 years. The central bank also projected that inflation would reach its 2% target in the second half of its forecast period, hinting at the possibility of additional rate hikes. However, BOJ Governor Kazuo Ueda offered little clarity on when or at what pace these potential hikes might occur. The yen’s rally was further fueled by US President Donald Trump’s call for the Federal Reserve to cut interest rates, which contributed to a weakening of the dollar.
Dollar supported by Trump’s tariff threats amid volatility
On the other hand, the dollar received some support after Trump threatened Colombia with tariffs and sanctions, reigniting fears of global trade disruptions. The mix of central bank policy shifts and trade tensions led to a volatile currency market, with the yen benefiting from the broader global uncertainties.
