Forecasts for USD to JPY
The USD to JPY exchange rate remains under pressure as recent trade policy uncertainties prompt caution among investors. Analysts indicated that the US dollar has weakened amid growing concerns over stalled trade talks, particularly between the US and its major trading partners, leading to a recent trading level of 142.6 JPY per dollar, which is notably 2.6% below its three-month average of 146.4.
Despite news of a new trade agreement between the US and the UK, which President Trump characterized as the "first of many," specifics remain vague, including the retention of a 10% tariff on UK imports. This lack of clarity contributes to market apprehension, particularly as the US imposes reciprocal tariffs of 24% on Japanese goods, influencing perceptions of the dollar and complicating international relationships.
The yen has found some strength as a safe-haven amidst ongoing trade tensions, with MUFG Research projecting a USD/JPY exchange rate of 154.00 for the first quarter of 2025, gradually decreasing to 148.00 by Q4 2025. However, this outlook may require reassessment given the yen's recent depreciation against the dollar in light of heightened tariff discussions.
The Japanese yen, supported by its safe-haven status, tends to appreciate during global uncertainties; however, it is also susceptible to external factors, such as oil price fluctuations. Recent data showed the oil price at 64.78 USD, which is 4.8% under its three-month average of 68.05, indicating considerable volatility in that market that could influence the yen due to Japan's reliance on energy imports.
The future trajectory of the USD/JPY pair will likely hinge on forthcoming economic data, Federal Reserve policies, and ongoing developments in trade relations. As the Federal Reserve navigates interest rate policies and inflationary pressures, investor sentiments around the US dollar will continue to evolve, affecting the yen's competitive positioning in the forex market.
