USD/JPY falls back to near 142.30 as USD’s relief recovery shrinks
- USD/JPY slides to near 142.30 as the USD’s recovery has fizzled out.
- US Bessent indicated that both the US and China can reduce additional tariffs on each other.
- Japan's Akazawa is scheduled to visit Washington for trade negotiations on April 30.
The USD/JPY pair retreats to near 142.30 during European trading hours on Thursday after a relief recovery move seen in the last two trading days. The pair falls back as the US Dollar Index (DXY) retraces after failing to extend its two-day recovery above the key level of 100.00.
The recovery move in the US Dollar has been shortened, even though Washington seems hopeful of a de-escalation in the trade war between the United States (US) and China. US Treasury Secretary Scott Bessent signaled on Wednesday that both nations could reduce additional tariffs imposed on each other mutually.
“I don’t think either side believes that the current tariff levels are sustainable, so I would not be surprised if they went down in a mutual way,” Bessent said.
Fears of an intense trade war between the world’s two largest powerhouses started ebbing after US President Donald Trump expressed willingness to make a deal with Beijing. Discussions with Beijing are going well, and I think that we will reach a deal,” Trump said on Tuesday.
On the domestic front, investors await the US Durable Goods Orders data for March, which will be published at 12:30. Economists expect the Durable Goods Orders to have grown at a robust pace of 2%.
On the Tokyo front, investors look forward to Japan's Economy Minister Ryosei Akazawa’s visit to Washington on April 30 for negotiations on tariffs. Trade talks held last week between Tokyo and Washington didn’t turn out favorable for Japan, in which Akazawa asked the White House to review tariffs on automobiles and steel, according to the NHK report. US officials indicated that they cannot give Japan preferential treatment.
Japanese Yen FAQs
The Japanese Yen (JPY) is one of the world’s most traded currencies. Its value is broadly determined by the performance of the Japanese economy, but more specifically by the Bank of Japan’s policy, the differential between Japanese and US bond yields, or risk sentiment among traders, among other factors.
One of the Bank of Japan’s mandates is currency control, so its moves are key for the Yen. The BoJ has directly intervened in currency markets sometimes, generally to lower the value of the Yen, although it refrains from doing it often due to political concerns of its main trading partners. The BoJ ultra-loose monetary policy between 2013 and 2024 caused the Yen to depreciate against its main currency peers due to an increasing policy divergence between the Bank of Japan and other main central banks. More recently, the gradually unwinding of this ultra-loose policy has given some support to the Yen.
Over the last decade, the BoJ’s stance of sticking to ultra-loose monetary policy has led to a widening policy divergence with other central banks, particularly with the US Federal Reserve. This supported a widening of the differential between the 10-year US and Japanese bonds, which favored the US Dollar against the Japanese Yen. The BoJ decision in 2024 to gradually abandon the ultra-loose policy, coupled with interest-rate cuts in other major central banks, is narrowing this differential.
The Japanese Yen is often seen as a safe-haven investment. This means that in times of market stress, investors are more likely to put their money in the Japanese currency due to its supposed reliability and stability. Turbulent times are likely to strengthen the Yen’s value against other currencies seen as more risky to invest in.