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Key Points:
Early U.S. election results suggested a possible Trump victory. Traders responded to this shift by moving into the dollar, betting on Trump’s expected fiscal policies, which historically drive inflation and influence a stronger dollar.
With the yen weakening, some market participants now look towards the 160 yen-per-dollar level as a potential trigger for Bank of Japan intervention.
Looking at the recent action in USD/JPY, we see a strong rally pushing the pair to close around 153.991, with an intraday high reaching 154.381. The upward movement suggests considerable buying interest, likely spurred by both technical and fundamental drivers.
Picture: USD/JPY shows a strong bullish momentum with recent gains pushing toward 154.381, supported by aligned moving averages and a positive MACD, as seen on the VT Markets app.
The dollar’s strength against the yen stems from expectations that a Trump administration would bring tariff-driven price increases and tax cuts, which tend to elevate inflation.
This inflationary outlook raises prospects for higher U.S. Treasury yields, making the dollar more attractive. As a result, USD/JPY movement has accelerated, signalling traders’ positioning for a potential economic shift under Trump.
The USD/JPY climb brings the yen closer to the 160 level, seen by many as a key point for possible intervention by the Bank of Japan.
A weaker yen has mixed implications: while it supports Japanese exports, it can lead to rising import costs, especially in energy, which Japan heavily relies on. This scenario could add pressure on Japan’s central bank to shift its ultra-low rate policy if inflationary pressures emerge domestically due to a weaker yen.
The two-year JGB yield, more sensitive to shifts in monetary policy, reached 0.475%, a level last seen in 2008. This uptick in Japanese bond yields reflects both U.S.-driven inflation concerns and Japan’s own potential need to respond to a weakening yen.
See also: US Stock Futures, Dollar Rise as Early Results Favour Trump
Should USD/JPY continue to rise, traders expect volatility ahead, especially if the Bank of Japan takes steps to stabilise the yen amid these global shifts.
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