The USD/JPY market is currently bullish, with the dollar gaining strength recently.
Key drivers include:
- A widening interest rate gap, as the U.S. Federal Reserve prepares for potential rate cuts while the Bank of Japan has only recently increased rates.
- U.S. Treasury yields are firm, which supports the dollar against the yen.
- Japan is experiencing rising import costs due to a weaker yen, intensifying calls for government intervention.
In the near term, the trading range is likely to remain above the recent average, reflecting volatility.
Upside risks include stronger-than-expected U.S. economic data, which could reinforce dollar strength. Conversely, a swift intervention by the Japanese government to stabilize the yen could lead to a sudden decline in the dollar's value against the yen.
As oil prices fluctuate, the ongoing impact on Japan’s import costs could further shape currency movements in the coming weeks.
