Key Points:
- JPY weakens toward 150 per dollar, retreating from recent highs despite hawkish BOJ remarks.
- BOJ Deputy Governor hints at further rate hikes, but monetary conditions remain loose.
- Trade tensions weigh on yen, as US tariffs on Canada, Mexico, and China fuel economic uncertainty.
Yen Retreats as BOJ Cautious Approach Dampens Hawkish Hopes
The Japanese yen weakened toward 150 per dollar on Wednesday, pulling back from its strongest levels in five months. Despite hawkish remarks from BOJ Deputy Governor Shinichi Uchida, traders remain skeptical about the pace of monetary tightening.
Uchida reaffirmed that the BOJ would raise interest rates further if economic projections hold, reinforcing expectations of an eventual exit from ultra-loose policies. However, he also cautioned that monetary conditions remain highly accommodative, with the BOJ maintaining limited reductions in Japanese Government Bond holdings.
This contradictory stance led to a reversal in yen gains, as markets interpreted Uchida’s comments as an indication that any tightening would be gradual and data-dependent.
Trade Tensions Add to Yen’s Downward Pressure
Externally, the yen faced additional selling pressure from worsening trade relations. The US implemented new tariffs on Canada, Mexico, and China on Tuesday, sparking retaliatory measures from affected nations.
The tariffs dampened risk sentiment, prompting traders to reassess the yen’s role as a safe-haven asset. Japan’s export-driven economy remains vulnerable, with prolonged trade disruptions posing risks to growth and corporate earnings.
Technical Analysis
The USD/JPY pair is showing a modest uptrend of 0.13%, with the price opening at 149.708 and closing at 149.910. The pair tested a high of 150.183 before pulling back slightly, while the low was recorded at 149.579.
Picture: USD/JPY tests 150.18 resistance as bullish momentum builds, as seen on the VT Markets app
The moving averages (5, 10, 30) indicate a recovery, with price action trending above them, suggesting continued bullish momentum. The MACD histogram is stabilising, showing signs of reduced selling pressure and a potential continuation of gains.
With BOJ policymakers maintaining a cautious stance, yen traders are closely watching the next key support level at 150 per dollar. A further break past 150 could trigger speculation about BOJ intervention, adding volatility to yen trading. Market participants will monitor upcoming BOJ minutes and US economic data, which could shift monetary policy expectations and impact USD/JPY momentum.
