Yen Weakens Again, USD/JPY Supported by Dollar and Energy Concerns
USD/JPY strengthened and held around 159.50 in Thursday's trading, as the US dollar remained supported by cautious sentiment in global markets. The pair's strengthening occurred as market participants shifted their attention back to geopolitical risks in the Middle East, which boosted demand for the dollar while holding back the Japanese yen's recovery.
Pressure on the yen arose because the market perceived the Japanese currency as not fully functioning as a hedge as usual. Reuters noted that surging energy prices and changes in the structure of trade flows made the yen more vulnerable when oil prices rose sharply. This situation gave the dollar an advantage, especially as the market adjusted its expectations for US interest rates amid rising energy inflation and bond yields.
Fundamentally, the current direction of USD/JPY is largely influenced by a combination of three factors: a strengthening dollar due to safe-haven demand, rising US yields due to growing market doubts about the Fed's interest rate cuts, and additional pressure on the yen from high oil prices. Reuters even reported that Japanese authorities have begun discussing unusual measures to support the yen, including focusing on the energy market, indicating growing concern about the currency's weakening.
In the short term, the market needs to pay attention to whether the USD/JPY can hold this high or whether it will trigger concerns about Japanese intervention. Furthermore, developments in the Iran conflict, oil price movements, and comments from Fed officials will significantly determine the currency's future direction. As long as the dollar remains strong and the yen has not found solid new support, the USD/JPY is likely to continue trading with an upward bias, although its movements could remain sensitive to geopolitical headlines and potential verbal action from Tokyo.
Causes:
1. The US dollar remains sought after as global markets remain cautious amid the uncertainty surrounding the Iran conflict.
2. US yields remain high as markets reduce expectations for a Fed rate cut this year.
3. The yen is under pressure from surging energy prices and its fading safe-haven status.
Things to watch:
1. The 159.50 area and its surroundings, as this is a key short-term level for the USD/JPY.
2. The risk of intervention or harsh comments from Japanese authorities if the yen continues to weaken.
3. The direction of oil prices, Treasury yields, and Fed officials' speeches, as these three factors could directly move this pair. (CP)
Source: Newsmaker.id
