Japanese Yen rises on safe-haven flows, traders await BoJ rate update

The Japanese Yen (JPY) edges higher during the Asian session on Thursday, though the upside potential seems limited as traders keenly await the Bank of Japan (BoJ) policy update. Traders will look for cues about the possibility of a rate hike in December or early next year amid speculations that Japan’s new Prime Minister Sanae Takaichi will pursue aggressive fiscal spending plans and resist early tightening. Hence, the outlook will play a key role in determining the next leg of a directional move.

Heading into the key central bank event, the market anxiety ahead of the crucial meeting between US President Donald Trump and his counterpart, Xi Jinping, is seen underpinning the safe-haven JPY amid intervention fears. The US Dollar (USD), on the other hand, struggles to capitalize on Wednesday’s hawkish FOMC-inspired gains to an over two-week high. This keeps a lid on the USD/JPY pair’s solid recovery from the vicinity of mid-151.00s, or a one-week low, touched the previous day.

Japanese Yen benefits from reviving safe-haven demand as traders keenly await the BoJ decision

• The Bank of Japan is widely expected to keep interest rates steady at the end of a two-day policy meeting on Thursday amid the uncertainty over the impact of US trade tariffs and Japan’s new Prime Minister Sanae Takaichi’s pro-stimulus stance.
• Meanwhile, US Treasury Secretary Scott Bessent on Wednesday urged Japan’s government to allow the BoJ space to avoid excess exchange rate volatility, suggesting that the US may keep pressuring Japan to tighten monetary policy more quickly.
• Hence, the market focus will remain glued to the BoJ’s communication on the future pace of rate hikes, which will influence the near-term trajectory for the Japanese Yen. In the meantime, reviving safe-haven demand is seen benefiting the JPY.
• US President Donald Trump will meet Chinese leader Xi Jinping after months of turmoil over trade issues between the world’s two largest economies. This, in turn, keeps investors on the edge and underpins the JPY during the Asian session.
• The US Dollar shot to an over two-week top on Wednesday after the Federal Reserve pushed back against market expectations for another interest rate cut in December. Earlier, the US central bank lowered borrowing costs by 25 basis points.
• The US central bank also said it would stop reducing the size of its balance sheet as soon as December, marking the end of its quantitative tightening. Moreover, economic risks stemming from the US government shutdown weigh on the USD.

USD/JPY mixed technical setup warrants some caution before placing aggressive bearish bets

The USD/JPY pair struggles to find acceptance above the 153.00 mark and remains below the 153.25-153.30 supply zone, or the monthly peak retested earlier this week. The subsequent fall favors bearish traders, though positive oscillators on the daily chart back the case for the emergence of dip-buyers near the 152.00 round figure. A convincing break below the said handle would expose the overnight swing low, around the 151.55-151.50 region, before spot prices extend the slide further towards the 151.10-151.00 pivotal support. Some follow-through selling would confirm a fresh breakdown and pave the way for deeper losses.

On the flip side, the 153.00 round figure now seems to act as an immediate hurdle ahead of the 153.25-153.30 region, above which the USD/JPY pair could aim to reclaim the 154.00 mark. The momentum could extend further towards the next relevant resistance near mid-154.00s en route to the 154.75-154.80 region and the 155.00 psychological mark.