The yen rushed higher to a two-month high against the dollar on Wednesday in Asian trade, expanding the gains for the third straight session on strong investment demand. 

It comes after Japanese wages rallied to a two-year high, raising the inflationary pressures on the Bank of Japan policymakers, and bolstering the case for a rate hike in March.

The Price

The USD/JPY fell 0.8% today to 153.09 yen per dollar, with a session-high at 154.46.

The yen rose 0.25% against the dollar on Tuesday for a second session as US 10-year treasury yields dropped.

Japanese Wages

Japanese data showed full-time wages rose 4.8% y/y in December, the best growth since 2022, and passing estimates of a 3.6% rise.

Higher wages would heap inflationary pressures on the Bank of Japan and boost the odds of multiple rate hikes this year.

Japanese Rates

Following the data, the odds of a Japanese 0.25% rate hike in March rose from 50% to 60%. 

Now investors await more data on Japanese inflation, unemployment, and wages to gather more clues before the March BOJ meeting.

Gold prices rose in European trade on Tuesday and maintained the gains for the fourth straight session, thus trading near recent record highs on strong haven demand amid a tense atmosphere in the global markets due to US tariff threats. 

US President Donald Trump suddenly suspended the 25% tariffs on Canada and Mexico for 30 days as all sides negotiate a settlement.  

And starting next Tuesday, investors await a series of important US labor data, which could provide clues on the odds of a US rate cut in March.

The Price

Gold prices rose 0.35% today to $2824 an ounce, with a session-low at $2807.

On Monday, gold rose 0.6% on Monday, the third profit in a row, hitting a record high at $2830 on strong investment demand. 

Trump Delays Tariffs

At the last moment, US President Donald Trump suspended tariffs on Canadian and Mexican imports for 30 days in exchange for both countries committing to fight illegal immigration and the drug trade.

Both Canadian and Mexican governments announced plans to bolster border patrols in response to US President Trump’s strict measures against illegal immigration and drug trafficking. 

The US 10% tariffs on China went into effect on Tuesday, threatening trade escalation between the largest two economies in the world, with Trump aiming at punishing China for not taking enough measures to stem the tide of illegal drugs, and to protect US manufacturing. 

US Rates

According to the Fedwatch tool, the odds of a March Fed 0.25% rate cut stood at just 13.5% currently. 

Now investors await important US private sector employment, unemployment claims, in addition to the all important US payrolls data this week to gather more clues. 

SPDR

Gold holdings at the SPDR Gold Trust rose 0.86 tons yesterday to a total of 865.63 tons, the highest since January 22.

The yen fell in Asian trade on Tuesday against the greenback and other major rivals as the risk appetite improved in the market after US President Donald Trump suspended the 25% tariffs on Canada and Mexico for 30 days. 

Sentiment is still wobbly as the US carried on its 10% additional tariff on Chinese imports, with China announcing retaliatory measures. 

Now traders await more clues about the likelihood of a Bank of Japan 0.25% rate hike in March.

The Price

The USD/JPY pair rose 0.5% today to 155.40 yen per dollar, with a session-low at 154.68.

The yen rose 0.3% yesterday against the greenback on haven demand as trade tensions surged in the markets. 

Trump Delays Tariffs 

At the last moment, US President Donald Trump suspended tariffs on Canadian and Mexican imports for 30 days in exchange for both countries committing to fight illegal immigration and the drug trade.

Both Canadian and Mexican governments announced plans to bolster border patrols in response to US President Trump’s strict measures against illegal immigration and drug trafficking. 

US Tariffs on China

US 10% tariffs on China went into effect on Tuesday, threatening trade escalation between the largest two economies in the world, with Trump aiming at punishing China for not taking enough measures to stem the tide of illegal drugs, and to protect US manufacturing. 

A White House spokesman said President Trump won’t conduct talks with his Chinese counterpart until later this week.

During his first term in 2018, Trump launched an aggressive two year trade war with China, aiming at chipping away its huge trade surplus with the US, which heavily impacted global supply chains. 

In an attempt to end the dispute, China agreed in 2020 to increase its yearly purchases of US products by $200 billion, but the agreement was hobbled by the Covid 19 pandemic. 

In a new escalation, Trump warned of even more tariffs to come if China failed to take actual steps to stem the flow of the fentanyl drug.

China described Fentanyl as an American problem, adding it’ll combat the new tariffs at the World Trade Organization, while announcing retaliatory tariffs of its own.

Japanese Rates

Recent data showed Tokyo’s inflation accelerated to one-year highs, bolstering the odds of a 0.25% Bank of Japan rate hike in March to 50%.

Gold prices rose on Monday as the dollar rose against  most major rivals, with the precious metal hitting a fresh record high amid concerns about a potential trade war. 

US President Donald Trump announced last week 25% tariffs on Mexico and Canada starting this month, and a 10% tariff on China. 

The International Monetary Fund warned of damage to global growth due to the trade war between US and other economies. 

Trump admitted that Americans might feel some pain from the tariffs, but it’s a cost worth paying.

Earlier US data showed the manufacturing PMI rose to 50.9 in January from 49.2 in December, while analysts expected no change. 

Otherwise, the dollar index rose 0.5% as of 20:51 GMT to 108.8, with a session-high at 109.8, and a low at 108.5.

On trading, gold spot prices rose 0.8%, or $22 as of 20:52 GMT to $2857 an ounce.