Yen hits eight-week high on BOJ hike bets, lower trade war risks
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The Japanese yen surged to its highest level in eight weeks against the U.S. dollar on Thursday, as speculation around an imminent Bank of Japan rate hike intensified. Meanwhile, the U.S. dollar softened as markets reassessed global trade war risks following a pause in tariffs on Mexico and Canada.
BOJ Signals Rate Hikes, Yen Gains Ground
The yen climbed to 151.81 per dollar, its strongest level since December 12, after BOJ board member Naoki Tamura suggested that interest rates may need to reach 1% by the second half of fiscal 2025. The market is now pricing in a 98% probability of a BOJ rate hike by September, further strengthening the yen. Despite Tamura later clarifying that his comments did not imply a neutral rate of 1%, the JPY/USD pair remained firm at 152.45 as of 06:16 GMT. Analysts noted that geopolitical factors, including uncertainties surrounding U.S. trade policies, were also supporting the yen.
U.S. Dollar Weakens as Trade War Fears Recede
The U.S. Dollar Index (DXY) fell to 107.74, retreating from its three-week high of 109.88 earlier this week. The greenback had initially surged on expectations of aggressive tariffs, but investor sentiment shifted after the Trump administration granted Mexico and Canada a one-month reprieve from the planned 25% tariffs. While Washington’s 10% tariff on China remains in effect, markets are treating it as "business as usual," according to analysts. The easing of immediate trade tensions has reinforced expectations of two Federal Reserve rate cuts by year-end, adding pressure on the U.S. dollar.
Sterling Slips Ahead of BoE Decision
The British pound edged lower to $1.2483 after reaching a one-month high of $1.2550 in the previous session. Investors are widely expecting the Bank of England to cut rates by 25 basis points, with market-implied odds standing at 92%.
China’s Currency Stabilizes After Strong Yuan Fixing
The offshore yuan (USDCNH) held steady at 7.2865 per dollar, supported by the People’s Bank of China setting its strongest official fixing in three months. This move helped ease concerns of a potential currency devaluation amid ongoing trade tensions.
Market Outlook: All Eyes on U.S. Jobs Report
Traders are now looking ahead to Friday’s U.S. Nonfarm Payrolls (NFP) report, which could significantly impact Fed rate expectations. With Wall Street forecasting 154,000 new jobs added in January, any surprise deviation from expectations could trigger sharp moves across major currency pairs. For now, the yen’s strength and the dollar’s subdued performance suggest that rate differentials and trade policy developments will remain key drivers in global forex markets.
BOJ Signals Rate Hikes, Yen Gains Ground
The yen climbed to 151.81 per dollar, its strongest level since December 12, after BOJ board member Naoki Tamura suggested that interest rates may need to reach 1% by the second half of fiscal 2025. The market is now pricing in a 98% probability of a BOJ rate hike by September, further strengthening the yen. Despite Tamura later clarifying that his comments did not imply a neutral rate of 1%, the JPY/USD pair remained firm at 152.45 as of 06:16 GMT. Analysts noted that geopolitical factors, including uncertainties surrounding U.S. trade policies, were also supporting the yen.
U.S. Dollar Weakens as Trade War Fears Recede
The U.S. Dollar Index (DXY) fell to 107.74, retreating from its three-week high of 109.88 earlier this week. The greenback had initially surged on expectations of aggressive tariffs, but investor sentiment shifted after the Trump administration granted Mexico and Canada a one-month reprieve from the planned 25% tariffs. While Washington’s 10% tariff on China remains in effect, markets are treating it as "business as usual," according to analysts. The easing of immediate trade tensions has reinforced expectations of two Federal Reserve rate cuts by year-end, adding pressure on the U.S. dollar.
Sterling Slips Ahead of BoE Decision
The British pound edged lower to $1.2483 after reaching a one-month high of $1.2550 in the previous session. Investors are widely expecting the Bank of England to cut rates by 25 basis points, with market-implied odds standing at 92%.
China’s Currency Stabilizes After Strong Yuan Fixing
The offshore yuan (USDCNH) held steady at 7.2865 per dollar, supported by the People’s Bank of China setting its strongest official fixing in three months. This move helped ease concerns of a potential currency devaluation amid ongoing trade tensions.
Market Outlook: All Eyes on U.S. Jobs Report
Traders are now looking ahead to Friday’s U.S. Nonfarm Payrolls (NFP) report, which could significantly impact Fed rate expectations. With Wall Street forecasting 154,000 new jobs added in January, any surprise deviation from expectations could trigger sharp moves across major currency pairs. For now, the yen’s strength and the dollar’s subdued performance suggest that rate differentials and trade policy developments will remain key drivers in global forex markets.