The Japanese Yen weakens against the US Dollar as concerns about US trade tariffs persist, despite expectations for further interest rate hikes by the Bank of Japan.
The Japanese Yen (JPY) continues to experience downward pressure against the US Dollar (USD) during the Asian trading session on Tuesday, despite a lack of sustained selling. This weakness stems from concerns surrounding US President Donald Trump's potential trade tariffs , which are perceived as undermining the JPY's traditional safe-haven status.
While expectations of further interest rate hikes by the Bank of Japan (BoJ) and the Federal Reserve's (Fed) potential to lower borrowing costs twice this year could mitigate some losses for the JPY, the threat of tariffs remains a major headwind. Trump's decision to delay the imposition of trade tariffs on Canada and Mexico by 30 days initially provided some relief, but worries persist that Japan could become a target for these tariffs in the future. This uncertainty, coupled with some USD buying, has helped the USD/JPY pair hold comfortably above the 155.00 psychological level. Japanese officials, including Prime Minister Shigeru Ishiba and Finance Minister Katsunobu Kato, are closely monitoring the situation and preparing to address the potential economic fallout from any trade tensions. The BoJ, meanwhile, is signaling its commitment to further tightening monetary policy. The bank's Summary of Opinions released on Monday revealed that board members unanimously agreed on the need to continue raising interest rates if economic activity and inflation remain on track. This stance is supported by a recent surge in core inflation in Tokyo, the fastest annual pace in nearly a year. On the US economic front, the Institute of Supply Management's (ISM) Manufacturing Purchasing Managers' Index beat expectations in January, indicating a strengthening manufacturing sector. Furthermore, rising inflation measures and a resilient labor market suggest that the Fed might be less inclined to cut interest rates aggressively, which could provide further support for the USD
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