The USD/JPY pair is recovering to near 153.35 during Thursday’s early Asian session. The US dollar (USD) is strengthening against the Japanese yen (JPY) after US Treasury Secretary Scott Bessent confirmed a powerful USD policy. The weekly U.S. jobless claims report will be released later on Thursday.
Bessent said on Wednesday that the US is pursuing a powerful dollar policy and that means getting the right fundamentals in place. He also denied that the United States was intervening in currency markets to support the Japanese yen.
“A rebound/rebound in the USD is really logical given that Bessent has pulled back as much as you could imagine on the assumption that the Trump administration is trying to create a softer USD as well as quiet market rumors that the Treasury also wanted to support the yen,” said Michael Brown, a market analyst at online broker Pepperstone in London.
As widely expected, the US Federal Reserve (Fed) kept interest rates unchanged at its January meeting on Wednesday, citing still elevated inflation coupled with solid economic growth. Fed Chair Jerome Powell said during a news conference that “job growth remains low and the unemployment rate is showing some signs of stabilizing.”
Powell emphasized that the Fed is “well-prepared” to evaluate incoming data on a meeting-by-meeting basis and is not on a predetermined course on future interest rate decisions. Markets expect the U.S. central bank to wait until at least June before adjusting its benchmark rate again.
Japanese Yen FAQs
The Japanese yen (JPY) is one of the most frequently traded currencies in the world. Its value is largely determined by, among other things, the performance of the Japanese economy, but in particular the policy of the Bank of Japan, the difference between the yields of Japanese and American bonds, and the risk sentiment of investors.
One of the tasks of the Bank of Japan is currency control, so its movements are crucial for the yen. The BOJ has at times intervened directly in currency markets, generally to depress the value of the yen, although it often refrains from doing so due to the political concerns of its major trading partners. The BOJ’s ultra-loose monetary policy in 2013–2024 resulted in the depreciation of the yen against other major currencies due to the growing policy divergence between the Bank of Japan and other major central banks. More recently, the gradual withdrawal from this ultra-loose policy has provided some support to the yen.
Over the past decade, the BoJ’s stance of sticking to ultra-loose monetary policy has led to widening policy divergences with other central banks, particularly the US Federal Reserve. This supported a widening spread between US and Japanese 10-year bonds, which supported the US dollar against the Japanese yen. The BoJ’s decision to phase out ultra-loose policy in 2024, combined with interest rate cuts at other major central banks, narrows the gap.
The Japanese yen is often viewed as a safe-haven investment. This means that in times of market stress, investors are more likely to put their money into the Japanese currency due to its supposed reliability and stability. The turbulent times are likely to strengthen the value of the yen relative to other currencies considered riskier to invest in.
