USD/JPY Trading Alert: Yen Faces Pressure as BoJ and Fed Shape Market Trends!

The Japanese Yen (JPY) faced selling pressure during the Asian session on Tuesday, halting its three day winning streak against the US Dollar (USD). Comments from Bank of Japan (BoJ) Deputy Governor Ryozo Himino added to the uncertainty about when the central bank might raise interest rates again.

At the same time, a "risk-on" market sentiment, supported by reports of a gradual increase in US tariffs, weakened the safe haven appeal of the JPY. This move helped USD/JPY stabilize after its recent slide from a multi month high of 158.00, though gains remain limited.

Key Drivers for USD/JPY Traders

• BoJ's Rate Hike Uncertainty

Deputy Governor Himino emphasized a cautious approach to rate hikes, citing risks at home and abroad. Investors speculate that the BoJ may wait until April to assess wage momentum before acting.

• Fed's Hawkish Stance

The Federal Reserve’s December pivot dashed hopes for a narrowing of the US Japan yield gap. Friday's strong US Nonfarm Payrolls report reduced expectations of rate cuts in 2025, supporting the USD.

• US Treasury Yields

A modest drop in US Treasury yields after hitting a 14month high has limited USD gains, keeping USD/JPY in check.

• Market Sentiment

Easing fears over US trade tariffs have softened inflation concerns, slightly capping the USD's rise.

For USD/JPY traders, this combination of global and domestic factors emphasizes the importance of monitoring BoJ updates, US inflation data, and Federal Reserve signals.

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