The Japanese yen traded near its strongest levels in months on Tuesday, buoyed by a broad decline in the U.S. dollar as investors reassessed the interest rate outlook in the wake of softer U.S. economic data. The move reinforces the yen’s appeal as a safe-haven currency amid rising global uncertainty.
USD/JPY hovered around 147.90, just off its recent lows, as the greenback struggled to regain momentum following weaker-than-expected U.S. inflation and retail sales figures. Markets are now increasingly pricing in the possibility of a Federal Reserve rate cut in the second half of 2025, a shift that has put downward pressure on Treasury yields and the dollar alike.
Meanwhile, the Bank of Japan has remained cautious, signaling that further tightening will be slow and measured despite ending negative interest rates earlier this year. That divergence—combined with expectations of Fed easing—has helped support the yen even in the absence of aggressive BoJ policy action.
“The yen is getting a boost from changing rate dynamics globally,” said a Tokyo-based FX strategist. “While the BoJ isn’t likely to tighten much further, the fact that the Fed may start cutting before the BoJ hikes again has narrowed rate differentials and shifted market flows.”
The currency’s strength also reflects growing caution in financial markets, with geopolitical tensions and volatile commodity prices prompting investors to unwind dollar-long positions and rotate into lower-risk assets like the yen. Technical levels around 148.00 have held firm, suggesting strong resistance for the dollar.
Traders are now looking ahead to upcoming U.S. jobless claims and comments from Federal Reserve officials later this week. Any further signs of economic slowing could reinforce dovish expectations and drive the yen even higher.
