Yen gives up four-month high on profit-taking

The yen fell in Asian trade on Wednesday against a basket of major rivals, giving up four-month highs against the dollar on profit-taking, as investors shun new positions ahead of data that would present clues on upcoming Japanese interest rate decisions.  

The yen is also pressured by higher US 10-year treasury yields as Trump prepares to enforce his tariffs on Canada and Mexico, raising inflationary pressures on the Federal Reserve.

The Price

The USD/JPY pair rose 0.35% today to 149.55 yen per dollar, with a session-low at 148.61.

The yen rose 0.45% on Tuesday, with a four-month high at 148.56 following strong Japanese services data for January.

Japanese Rates

Earlier Tokyo data showed services prices rose 3.1% in January, the fastest since June 2024, and up from 3.0% in December.

Japan’s GDP growth accelerated in the fourth quarter of last year, in turn raising pressures on BOJ policymakers.

Bank of Japan member Hajimi Takata asserted the importance of gradual interest rate hikes to contain the risks of inflation, which is approaching the 2% target.

BOJ Vice Governor Riyuzu Himuno said the path of monetary policies will depend on data, especially wages growth in both 2024 and 2025.

Following the data, the odds of a BOJ March interest rate hike rose by 0.25% at the March meeting to 80%.

US Yields

US 10-year treasury yields rose 0.7% on Wednesday away from 11-week lows at 4.283%, on track for the first profit in six sessions.

As Trump prepares to enforce his tariffs on Mexico and Canada next week, inflationary pressures are expected to mount on the Federal Reserve, which would likely lead to interest rates being held at current levels for an extended duration this year.