The Japanese yen remains under pressure, holding near a one-week low against the US dollar as traders await key economic data from the US. The currency has struggled to maintain momentum amid a stronger dollar, which is bolstered by rising expectations of further interest rate hikes from the Federal Reserve. As a result, the yen continues to face downward pressure, particularly as US economic data shows signs of resilience.
Market participants are focusing on the upcoming US Consumer Price Index (CPI) report, scheduled for release later this week, which could provide further clarity on inflationary pressures and influence the Fed’s next steps. A higher-than-expected CPI reading could cement expectations of aggressive Fed tightening, strengthening the dollar and leaving the yen vulnerable to additional losses.
The yen has been struggling to recover from recent lows, with a combination of factors weighing on the currency. Japan’s economic outlook remains subdued, and the Bank of Japan (BoJ) has shown no signs of shifting its ultra-loose monetary policy. As the US dollar gains traction, the interest rate differential between the US and Japan widens, making the yen less attractive for investors seeking higher yields.
USD/JPY 1-D Chart as of February 12th, 2025 (Source: TradingView)
Technicals indicate that the yen’s outlook remains bleak, with key support levels failing to hold against the USD. The pair has been consistently unable to break out of a narrow range, and analysts are watching the 130.00 level as a potential test point. Should the US CPI data come in stronger than expected, the yen could face additional downside risks, pushing it closer to those critical levels.
The broader global risk sentiment is also playing a role in the yen’s performance. With market participants shifting focus to US data and away from global risk factors, the yen’s safe-haven appeal has been somewhat diminished. In contrast, the US dollar has benefitted from the risk-off sentiment, maintaining its strength despite ongoing geopolitical and economic concerns.
Looking ahead, analysts remain cautious about the yen’s near-term prospects. While a shift in BoJ policy or a slowdown in US economic growth could offer some relief, much of the currency’s trajectory will depend on how the US CPI report influences market expectations. Until there is a clearer shift in fundamentals, the yen is likely to remain range-bound and vulnerable to further losses against the dollar.
