Japanese Yen Hits Weekly High on Weaker USD and BoJ Rate Hike Hopes

Japanese Yen Surges to Weekly High as USD Weakens, BoJ Rate Hike Hopes Rise

The Japanese Yen (JPY) strengthened further on Thursday, climbing to a fresh weekly high against the U.S. Dollar (USD) as traders reacted to a combination of domestic and international factors. The USD/JPY pair slipped below the mid-145.00s during early European trading hours, marking the third straight day of JPY gains.

Driving the Yen's rally is renewed speculation that the Bank of Japan (BoJ) may raise interest rates again in 2025. This comes alongside rising optimism over a potential trade agreement between Japan and the United States, which has added momentum to the currency’s safe-haven appeal.

Global risk sentiment has also shifted modestly toward caution, providing further support to the Yen. In contrast, the U.S. Dollar continues to struggle for direction despite reduced fears of a recession and scaled-back expectations for aggressive monetary easing by the Federal Reserve.

Meanwhile, recent signs of de-escalation in the U.S.-China trade dispute have not significantly impacted JPY demand, as the Yen remains resilient amid broader uncertainty. The continued emergence of fresh USD selling pressure has contributed to bearish sentiment surrounding the USD/JPY pair.

Looking ahead, investors are focused on Thursday’s U.S. Producer Price Index (PPI) report and a speech by Fed Chair Jerome Powell, both of which could offer new insights into the Fed's policy outlook. Until then, the current backdrop appears to favor further upside for the Japanese Yen.