Yen rushes to four-week high on strong demand
The Japanese yen rose in Asian trade on Tuesday against a basket of major rivals, resuming gains against the dollar after a short hiatus and hitting a four-week high on strong haven demand amid concerns about US debt levels.
Gains are also bolstered by the increasing odds of a Japanese interest rate hike in June in response to mounting inflationary pressures.
The Price
The USD/JPY price fell 0.5% today to 142.11, the lowest since April 29, with a session-high at 142.98.
The yen lost 0.2% on Monday against the greenback, the second loss in three days.
US Debt
US President Donald Trump said on Sunday that his tax reform bill will likely undergo big changes in the Senate.
According to the Congressional Budget Office, the bill will add $3.8 trillion to the government’s $36.2 trillion debt pile in the next ten years.
The huge US debt burden is back in the spotlight after Moody’s US credit rating downgrade last week and weak demand on government notes.
Investor confidence in US assets was further damaged by President Trump’s aggressive tariff policies in recent months.
Japanese Rates
Earlier Japanese data showed consumer prices rose 3.5% in April, the highest pace since early y023, beating estimates of 3.4%, and up from 3.2% in March.
Following the data, the odds of a Japanese 0.25% interest rate hike in June rose from 30% to 40%.
Bank of Japan Deputy Governor Shinichi Uchida said the bank will continue to raise interest rates if the economy recovers from the negative impact of US tariffs, however he still cautioned that the economic outlook remains highly uncertain.
Now traders await important Japanese data on inflation, unemployment, and wages to gather more clues.
Gold declines as Trump puts off EU tariffs
Gold prices fell nearly 1% on Monday after US President Donald Trump put off a 50% tariff on EU goods that was scheduled on June 1, in turn hurting gold’s haven appeal.
Gold spot prices fell 0.8% today to $3332 an ounce as of 12:50 GMT, while US gold futures fell 1% to $3331 an ounce.
US and UK markets are both closed on Monday for an official holiday.
Trump delayed off a scheduled tariff hike for EU goods to July 9 to give negotiations a breathing room.
Gold marks best weekly performance in six weeks before dipping
Gold marked its best weekly performance in six weeks last week, boosted by Trump’s tariff threats on EU goods, and a 25% tariff threat on iPhone made outside the US.
Despite the current dip, some institutional analysts still expect prices to retest the coveted $3500 barrier in upcoming months.
Chinese Imports Hit a One-Year Peak
Recent data showed Chinese gold imports doubled in April compared to March, hitting a one-year high, and reflecting strong Asian demand.
CitiGroup Raises Gold Outlook to $3500
On Sunday, CitiGroup raised its outlook for gold prices back to $3500 an ounce in the next three months, up sharply from $3150 in previous forecasts, following aggressive US tariff threats and mounting geopolitical tensions.
The bank expects gold to hold its ground between $3100 and $3500 in the second half of 2025 amid strong haven demand, with risks such as Russian aggression on Ukraine mounting.
Performance of Other Precious Metals
- Silver fell 0.3% to $33.38 an ounce
- Platinum fell 0.6% to $1088
- Palladium shed 0.6% to $987.27
Oil climbs as Trump extends tariff pause for EU until July
Oil prices rose in Asian trade on Monday after US President Donald Trump extended the tariff pause for the EU until July, reducing market jitters and underpinning oil prices.
Brent crude futures rose 0.6%, or 37 points to $65.15 a barrel, while US West Texas futures rose 34 cents, or 0.6% to $61.87 a barrel.
US President Donald Trump gave the EU an extended truce towards July 9 to reach a trade deal, backing off from an earlier threat to raise tariffs by 50% starting June 1.
Trump announced his decision to the journalists on Sunday after a phone call with the European Commission President Ursula von der Leyen, who asked for more time to reach an agreement.
Factors Behind the Rise
Both Brent and US crude extended their gains after closing over 0.5% higher on Friday, boosted by slower progress in US-Iran nuclear talks, reducing oversupply concerns.
Prices were also boosted by Baker Hughes data, which showed US energy companies reduced the oil rig count by 8 to 465 rigs last week, the lowest since November 2021.
The Gains Are Curbed
The gains remained limited by expectations that OPEC+ will approve a production hike of 411 thousand bpd in July at their meeting next week.
Reuters reported that the alliance will likely remove the rest of the voluntary output cuts, amounting to 2.2 million bpd, by the end of October.
What's behind bitcoin's recent record highs?
Recent severe fluctuations in the Japanese bonds market may have contributed to bitcoin’s surge above $112,000, even more than the risk-negating geopolitical developments usually cited, according to European research agency Bitwise.
It’s estimated that bitcoin’s surge could be linked to the trouble happening in Japanese bonds, with investors acknowledging bitcoin as a safe and alternative haven to disruptions in the traditional financial system.
Bitcoin hit a record high at $112,000 on May 22, before dipping near $109,700.
Even as some analysts link the surge to geopolitical developments, as US President Trump’s announcement of ceasefire talks between Russia and Ukraine, it seems that macroeconomic factors might have played a bigger role.
Japanese Bonds Collapse
Bitwise’s analysts point to the increasing worries about Japan’s sovereign credit rating, with long-term government note yields spiking.
Japan’s 30-year government note yield hit 3.185% in May 2025, a record high.
Government bonds are usually considered safe havens, but a surge in yields usually indicate concerns about the sustainability of government debt, with Japan’s debt to GDP ratio surpassing 250%, compared to 62% in Germany, even though both countries provide similar 30-year note yields at 3.1%.
Analysts believe that the steep decline in Japanese bond values might have pushed institutional investors to reconsider bitcoin’s role as an alternative safe investment.
Sovereign Risks Bolster Crypto Appeal
Bitwise’s analysts believe that investors wary from the traditional financial systems in the US and Japan are heading to bitcoin as a hedge to usual investments.
This is especially apparent as concerns about government defaults rise, which could very well send bitcoin prices towards $200,000 according to some analyses.
It’s worth noting that Spot Bitcoin ETFs in the US are only $1.3 billion away from breaking their investment influx record of $6.49 billion, achieved in November 2024.