The Japanese yen surged past the key 140 mark against the US dollar on Tuesday, as investors turned to safer currencies in light of mounting risks to US assets. With increasing uncertainty surrounding the independence of the Federal Reserve, concerns over tariffs, and the upcoming US-Japan finance talks, the yen strengthened by as much as 0.7%, reaching 139.90 per dollar — its highest level since September.
The yen’s performance made it the top G-10 currency of the day, benefiting from heightened demand for haven assets amid President Donald Trump’s ongoing trade war. The yen has appreciated nearly 7% this month alone, driven by investor concerns over the economic fallout from US trade policies.
Adding to the pressure on the dollar, rumors surfaced that President Trump may consider firing Fed Chairman Jerome Powell, further undermining the US currency. Trump has reportedly been laying the groundwork to blame the Fed for any economic fallout resulting from the trade war, especially if the central bank does not soon implement interest rate cuts.
Mizuho Securities analysts forecast that the yen could test its 2024 high of 139.58, supported by a drop in US stock prices and the upcoming US-Japan talks. “If the yen exceeds the 140 threshold or revisits last year’s mid-139 level, it could trigger technical buying, driving further yen appreciation,” explained Hideki Shibata, senior strategist at Tokai Tokyo Intelligence Laboratory.
Investor sentiment has shifted dramatically, with speculative traders becoming the most bullish on the yen in recent records, according to the Commodity Futures Trading Commission’s latest data from April 15. This shift comes ahead of a pivotal meeting between Japanese Finance Minister Katsunobu Kato and US Treasury Secretary Steven Mnuchin, which is expected to focus on currency discussions.
Past rhetoric from Trump has included criticism of Japan for allegedly keeping its currency weak to gain an unfair trade advantage. Kato, however, has indicated that the upcoming talks will build on existing currency-related discussions between the two nations.
Bloomberg’s strategists noted that while the USD/JPY pair briefly dipped below 140, it has shown hesitance to fall further. The broader trend of weakening confidence in the US economy, coupled with trade war uncertainties, is expected to keep pushing the yen higher in the coming weeks.
Despite these developments, Bank of Japan officials have expressed little intention to alter their policy stance of gradually raising interest rates. However, market expectations for a rate hike by year-end have diminished, with overnight index swaps now reflecting only a 59% chance, down from near certainty before the US tariff announcements.
As the US-Japan financial talks unfold, the future trajectory of the yen will continue to capture the attention of investors closely monitoring the evolving dynamics of global trade and US monetary policy.
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