USD/JPY rises sharply to near 158.00 Yen’s safe-haven appeal falters


  • USD/JPY gains to near 158.00 as the safe-haven demand of the Japanese Yen has eased.
  • Investors await the US inflation data for fresh guidance on interest rates.
  • Fed dovish bets have lately trimmed on upbeat US labor market data for December.

The USD/JPY pair moves sharply higher to near 158.00 in Tuesday’s European session. The asset gains firmly as the safe-haven appeal of the Japanese Yen (JPY) has faltered amid recovery in demand for risk-sensitive assets.

The Yen performed strongly in last three trading days against the US Dollar (USD) despite the latter rallied to a fresh more-than-two-year high. However, the Yen appears to be losing heat, with investors focusing on the United States (US) Consumer Price Index (CPI) data for December, which will be published on Wednesday.

Analysts at Bank of America (BofA) expect, "If US CPI surprises to the upside this week, upward pressure for USDJPY spot is likely to resume, due to the pair's high sensitivity to CPI surprises."

According to market expectations, annual headline inflation is estimated to have grown by 2.8%, faster than 2.7% in November. In the same period, the core CPI – which excludes volatile food and energy prices – rose steadily by 3.3%.

Signs of price pressures remaining stubborn would further weigh on Federal Reserve (Fed) dovish bets. Lately, Fed dovish prospects trimmed significantly after the release of the surprisingly stronger US Nonfarm Payrolls (NFP) data for December.

On the domestic front, the Japanese Yen will be influenced by the market speculation for the Bank of Japan’s (BoJ) likely interest rate action in the policy meeting on January 24. BoJ Deputy Governor Ryozo Himino said on Tuesday that the board will discuss whether to “raise interest rates next week and reach a decision”, based on the economic and price projections laid out in our quarterly outlook report."

Japanese Yen FAQs

The Japanese Yen (JPY) is one of the world’s most traded currencies. Its value is broadly determined by the performance of the Japanese economy, but more specifically by the Bank of Japan’s policy, the differential between Japanese and US bond yields, or risk sentiment among traders, among other factors.

One of the Bank of Japan’s mandates is currency control, so its moves are key for the Yen. The BoJ has directly intervened in currency markets sometimes, generally to lower the value of the Yen, although it refrains from doing it often due to political concerns of its main trading partners. The BoJ ultra-loose monetary policy between 2013 and 2024 caused the Yen to depreciate against its main currency peers due to an increasing policy divergence between the Bank of Japan and other main central banks. More recently, the gradually unwinding of this ultra-loose policy has given some support to the Yen.

Over the last decade, the BoJ’s stance of sticking to ultra-loose monetary policy has led to a widening policy divergence with other central banks, particularly with the US Federal Reserve. This supported a widening of the differential between the 10-year US and Japanese bonds, which favored the US Dollar against the Japanese Yen. The BoJ decision in 2024 to gradually abandon the ultra-loose policy, coupled with interest-rate cuts in other major central banks, is narrowing this differential.

The Japanese Yen is often seen as a safe-haven investment. This means that in times of market stress, investors are more likely to put their money in the Japanese currency due to its supposed reliability and stability. Turbulent times are likely to strengthen the Yen’s value against other currencies seen as more risky to invest in.

 

Share: Feed news

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.

Recommended content


Recommended content

Editors’ Picks

EUR/USD eases to daily lows near 1.0260

EUR/USD eases to daily lows near 1.0260

Better-than-expected results from the US docket on Friday lend wings to the US Dollar and spark a corrective decline in EUR/USD to the area of daily lows near 1.0260.

EUR/USD News
GBP/USD remains under pressure on strong Dollar, data

GBP/USD remains under pressure on strong Dollar, data

GBP/USD remains on track to close another week of losses on Friday, hovering around the 1.2190 zone against the backdrop of the bullish bias in the Greenback and poor results from the UK calendar.

GBP/USD News
Gold recedes from tops, retests $2,700

Gold recedes from tops, retests $2,700

The daily improvement in the Greenback motivates Gold prices to give away part of the weekly strong advance and slip back to the vicinity of the $2,700 region per troy ounce at the end of the week.

Gold News
Five keys to trading Trump 2.0 with Gold, Stocks and the US Dollar

Five keys to trading Trump 2.0 with Gold, Stocks and the US Dollar Premium

Donald Trump returns to the White House, which impacts the trading environment. An immediate impact on market reaction functions, tariff talk and regulation will be seen. Tax cuts and the fate of the Federal Reserve will be in the background.

Read more
Hedara bulls aim for all-time highs

Hedara bulls aim for all-time highs

Hedara’s price extends its gains, trading at $0.384 on Friday after rallying more than 38% this week. Hedara announces partnership with Vaultik and World Gemological Institute to tokenize $3 billion in diamonds and gemstones

Read more
Trusted Broker Reviews for Smarter Trading

Trusted Broker Reviews for Smarter Trading

VERIFIED Discover in-depth reviews of reliable brokers. Compare features like spreads, leverage, and platforms. Find the perfect fit for your trading style, from CFDs to Forex pairs like EUR/USD and Gold.

Read More

Forex MAJORS

Cryptocurrencies

Signatures