Japanese yen rises on safe haven flows, traders await BoJ interest rate update

The Japanese yen (JPY) edged higher during the Asian session on Thursday, although upside potential appears limited as traders anxiously await the Bank of Japan’s (BoJ) policy update. Traders will be looking for signs of the possibility of a rate hike in December or early next year amid speculation that Japan’s new Prime Minister Sanae Takaichi will pursue aggressive fiscal spending plans and resist early austerity. Therefore, the outlook will play a key role in determining the next leg of a directional move.

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

Japanese yen benefits from reviving safe-haven demand as traders anxiously await 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 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 urged Japan’s government on Wednesday to give the BoJ room to avoid excess exchange rate volatility, suggesting the US may keep pushing Japan to tighten monetary policy faster.
• Therefore, market focus will remain glued to the BoJ’s communication on the future pace of interest rate hikes, which will affect the short-term trajectory of the Japanese Yen. Meanwhile, a revival of safe demand is seen in favor of 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 edge and supports the JPY during the Asian session.
• The US dollar shot to a more than two-week high on Wednesday after the Federal Reserve pushed back against market expectations for another 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 easing. In addition, the economic risks resulting from the US government shutdown are weighing on the USD.

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

The USD/JPY pair is struggling to find acceptance above the 153.00 mark and remains below the 153.25-153.30 supply zone, or the monthly top retested earlier this week. The subsequent decline favors bearish traders, although positive oscillators on the daily chart support the emergence of dip buyers near the 152.00 figure. A convincing break below the said handle would reveal 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-up selling would confirm another collapse and pave the way for deeper losses.

On the upside, 153.00 round numbers now appear to act as an immediate obstacle ahead of the 153.25-153.30 region, above which the USD/JPY pair could aim to regain the 154.00 mark. Momentum may extend further towards the next relevant resistance near the mid-154.00s on the way to the 154.75-154.80 region and 155.00 psychological mark.