The Japanese yen weakened amid uncertainty about the timing of interest rate hikes and a rebound in risk appetite, and USD/JPY may test the 149 mark.
2025-08-13 13:53:54
The Japanese Yen (USD/JPY) weakened against the US Dollar (USD/JPY) during Asian trading on Wednesday, failing to extend its gains after rebounding from a one-week low the previous day. Uncertainty over the timing of a Bank of Japan rate hike, coupled with an upturn in global risk sentiment, reduced safe-haven demand and served as the primary drivers of the yen's decline.
Investors generally believe that the Bank of Japan will continue along the path of policy normalization, but the timing of interest rate hikes may be delayed. In contrast, the expectation of a September rate cut by the Federal Reserve has been widely accepted by the market and further confirmed by the US July CPI meeting expectations.
This kept the dollar index hovering near a two-week low and also provided some support to the low-yielding yen.
The Bank of Japan raised its inflation forecasts at its July meeting and indicated it would continue raising interest rates if economic and inflation trends meet its forecasts. However, domestic political uncertainty, tariff concerns, and continued declines in real wages have raised questions about the path of rate hikes.
Data released on Wednesday showed that Japan's corporate goods price index (CGPI) rose 2.6% year-on-year in July, lower than the previous value of 2.9%, but rising wholesale prices of food and agricultural products showed signs of spreading inflationary pressure, which maintained market expectations of an interest rate hike this year.
Strong performance in global risk assets also weakened the yen's safe-haven appeal. The S&P 500 and Nasdaq Composite Index hit record closing highs on Tuesday. The yen's weakness was driven by the combination of strength in risk assets and uncertainty surrounding the Bank of Japan's interest rate hike prospects.
Regarding the US dollar, data from the US Bureau of Labor Statistics showed that the CPI remained at 2.7% year-on-year in July, in line with expectations. The core CPI rose to 3.1% year-on-year, up from 2.9% in June. Analysts believe that the price pressures from tariffs may only be temporary. Coupled with the slowing US labor market and weakening economic growth, the market expects the Federal Reserve to cut interest rates at least twice this year.
The market focus is now turning to speeches by Federal Reserve officials, as well as the U.S. PPI data to be released on Thursday and Japan's preliminary second-quarter GDP data on Friday. These data may provide new fluctuation directions for the U.S. dollar against the yen.
Market analysts pointed out: "Against the backdrop of uncertainty in the Bank of Japan's policy and rising risk appetite, the yen is under short-term pressure, but expectations of a Fed rate cut will limit the rise of the dollar against the yen."
The daily chart shows that USD/JPY has held the previous resistance-turned-support level of 147.75 for two consecutive days, with signs of buying at low levels. If it breaks through the 148.55 level, the price is expected to further rise to the 149.00 mark;
On the contrary, if it falls below 147.70, the support levels will be 147.00 and 146.80 (4-hour 200-day moving average). Once lost, it may trigger a downside risk to 145.00.
Editor's opinion:
The USD/JPY pair is currently caught in a volatile trading range, with upside potential depending on whether global risk sentiment can be sustained and whether expectations of a Bank of Japan rate hike are further delayed. If the Federal Reserve signals a stronger rate cut in September, this could suppress the dollar's rebound and create resistance near the 149 level.
Investors generally believe that the Bank of Japan will continue along the path of policy normalization, but the timing of interest rate hikes may be delayed. In contrast, the expectation of a September rate cut by the Federal Reserve has been widely accepted by the market and further confirmed by the US July CPI meeting expectations.
This kept the dollar index hovering near a two-week low and also provided some support to the low-yielding yen.
The Bank of Japan raised its inflation forecasts at its July meeting and indicated it would continue raising interest rates if economic and inflation trends meet its forecasts. However, domestic political uncertainty, tariff concerns, and continued declines in real wages have raised questions about the path of rate hikes.
Data released on Wednesday showed that Japan's corporate goods price index (CGPI) rose 2.6% year-on-year in July, lower than the previous value of 2.9%, but rising wholesale prices of food and agricultural products showed signs of spreading inflationary pressure, which maintained market expectations of an interest rate hike this year.
Strong performance in global risk assets also weakened the yen's safe-haven appeal. The S&P 500 and Nasdaq Composite Index hit record closing highs on Tuesday. The yen's weakness was driven by the combination of strength in risk assets and uncertainty surrounding the Bank of Japan's interest rate hike prospects.
Regarding the US dollar, data from the US Bureau of Labor Statistics showed that the CPI remained at 2.7% year-on-year in July, in line with expectations. The core CPI rose to 3.1% year-on-year, up from 2.9% in June. Analysts believe that the price pressures from tariffs may only be temporary. Coupled with the slowing US labor market and weakening economic growth, the market expects the Federal Reserve to cut interest rates at least twice this year.
The market focus is now turning to speeches by Federal Reserve officials, as well as the U.S. PPI data to be released on Thursday and Japan's preliminary second-quarter GDP data on Friday. These data may provide new fluctuation directions for the U.S. dollar against the yen.
Market analysts pointed out: "Against the backdrop of uncertainty in the Bank of Japan's policy and rising risk appetite, the yen is under short-term pressure, but expectations of a Fed rate cut will limit the rise of the dollar against the yen."
The daily chart shows that USD/JPY has held the previous resistance-turned-support level of 147.75 for two consecutive days, with signs of buying at low levels. If it breaks through the 148.55 level, the price is expected to further rise to the 149.00 mark;
On the contrary, if it falls below 147.70, the support levels will be 147.00 and 146.80 (4-hour 200-day moving average). Once lost, it may trigger a downside risk to 145.00.
Editor's opinion:
The USD/JPY pair is currently caught in a volatile trading range, with upside potential depending on whether global risk sentiment can be sustained and whether expectations of a Bank of Japan rate hike are further delayed. If the Federal Reserve signals a stronger rate cut in September, this could suppress the dollar's rebound and create resistance near the 149 level.
- Risk Warning and Disclaimer
- The market involves risk, and trading may not be suitable for all investors. This article is for reference only and does not constitute personal investment advice, nor does it take into account certain users’ specific investment objectives, financial situation, or other needs. Any investment decisions made based on this information are at your own risk.
