The Japanese yen rose in Asian trade on Wednesday against a basket of major rivals, expanding the gains for the seventh straight session against the dollar and hitting a two-week high amid strong haven demand on the yen with risk aversion gripping the global markets.
It comes after bullish remarks by the Bank of Japan Deputy Governor this week, which boosted the odds of a BOJ rate hike this year.
The Price
The USD/JPY pair fell 0.45% today to 143.84 yen per dollar, the lowest since May 8, with a session-high at 144.55.
The yen rose 0.25% on Tuesday, the sixth daily profit in a row, and the longest such streak of gains since July 2023 on haven demand.
Risk Aversion
Most global stock markets are falling currently amid a clear case of risk aversion for various factors, such as:
– US President Donald Trump’s failure to convince his Republican allies with his tax cuts plan.
– Potential attempts by US officials to weaken the dollar during ministerial meetings for G7 officials in Canada.
– The US credit rating downgrade, which sparked concerns about US financial stability
– A surge in US treasury yields, raising the costs of financing and hurting the appeal of stocks
Trade Talks
The third round of US-Japan trade negotiations will commence later this week.
Japan’s finance minister Katsunubo Kato said he’ll seek to discuss forex exchange issues with US Treasury Secretary Scott Bessent, realizing that extreme fluctuations aren’t desirable.
Japanese Rates
Bank of Japan Deputy Governor Shinichi Uchida said the bank will continue to raise interest rates if the economy recovers from the negative impact of US tariffs, however he still cautioned that the economic outlook remains highly uncertain.
During a Diet session, Uchida said that main inflation will likely settle near the bank’s 2% target as log as local economic activities pick up.
Following the remarks, the odds of a BOJ rate hike in June rose from 25% to 30%.
Now traders await important Japanese data on inflation, unemployment, and wages to gather more clues.
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