The Japanese yen has rallied strongly against the U.S. dollar in recent days (USD/JPY) as currency traders bet on a potential shift in Federal Reserve interest rate policy.
A monthly close below 147.30 on Thursday could give further momentum to the yen’s gains, confirming a reversal of the uptrend that has powered dollar strength against the yen over the past two years.
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Dovish U.S. economic data, including lower core inflation and rising jobless claims, have fueled speculation that the Fed may ease up on its aggressive rate hike campaign. This would erode the yield advantage U.S. assets have enjoyed over Japanese ones. The impending tidal wave of mortgage refinancings in 2025 could also stay in the Fed’s hands.
So far, yen bulls have driven USD/JPY down to 147.15. A break below 147.30 could open the door for a steeper slide toward 140.
