The USD to JPY exchange rate shows a bullish bias, with the dollar firming recently.
Key drivers include the narrowing interest rate differential, as the Federal Reserve signals potential rate cuts while the Bank of Japan has recently raised rates. This divergence supports USD strength against the yen. Additionally, the strengthening U.S. labor market, highlighted by a drop in unemployment, enhances demand for the USD.
In the near term, the exchange rate is expected to remain within a range close to recent highs, maintaining levels significantly above its three-month average.
Upside risk factors include any unexpected hawkish comments from the Federal Reserve that could reinforce dollar strength. On the downside, further easing of inflation in Japan or aggressive fiscal measures could strengthen the yen and negatively impact the USD's value.