The Japanese Yen fell to a three-week low against the US dollar, trading near the 154.00 level on Monday, as markets absorbed the contrasting policy outlooks for the Bank of Japan (BoJ) and the Federal Reserve (Fed). Despite better-than-expected Japanese economic data, including a 2.1% monthly rise in Core Machinery Orders and improved Manufacturing PMI figures, investors remain skeptical that the BoJ will deviate from its accommodative stance at its meeting this Thursday.
Adding to the pressure, elevated US Treasury bond yields have bolstered demand for the dollar, further widening the appeal of US assets over the low-yielding Yen. The benchmark 10-year US Treasury yield reached a three-week high amid cautious sentiment over the Fed’s pace of monetary easing in 2024. Market participants largely expect the Fed to leave rates unchanged at its decision on Wednesday, but signs of stickier inflation have led to speculation of fewer rate cuts next year.
While geopolitical uncertainties—including conflicts in Ukraine and the Middle East—have provided moments of support for the Yen’s safe-haven appeal, these factors have done little to shift broader bearish sentiment. Expectations that Japan’s inflation will stay above the 2% target and an uptick in wages could justify tighter BoJ policies eventually, but market confidence in an immediate move remains weak, capping the Yen’s upside potential.
Technically, USD/JPY appears poised for further gains if it sustains momentum above key resistance levels, eyeing the 155.00 psychological mark as the next significant hurdle. However, a breach below critical support around 153.00 could expose the pair to deeper losses, potentially testing the pivotal 200-day Simple Moving Average near the 152.10 area. All eyes now turn to the outcomes of this week’s central bank meetings to determine the pair’s next decisive move.
