Japanese Yen remains tepid due to pre-New Year light trading

The Japanese Yen (JPY) shows modest strength against the US Dollar (USD) as expectations build for the Bank of Japan (BoJ) to hike interest rates in January. This sentiment follows stronger-than-expected Tokyo Consumer Price Index (CPI) inflation data and an uptick in Japan’s Jibun Bank Manufacturing PMI, which rose to 49.6 in December from 49.0 in November. While this marked the highest level since September, it still reflects a contraction in factory activity for the sixth consecutive month. The Nikkei 225 fell to 39,950 on Monday, snapping a two-day rally, amid declining US futures and caution over rising Treasury yields.

Meanwhile, the US Dollar faces pressure, with the Dollar Index (DXY) trading near 108.00 and Treasury yields for the 2-year and 10-year bonds softening to 4.32% and 4.62%, respectively. Despite this, the Fed’s hawkish stance and expectations for limited rate cuts in 2025 offer potential support for the Greenback. Tokyo’s inflation data highlighted a YoY increase in headline CPI to 3.0% and a rise in core inflation, signaling persistent price pressures.

The BoJ’s December meeting minutes suggest a cautious approach to monetary easing adjustments, contingent on inflation and wage growth trends. Governor Kazuo Ueda reiterated the BoJ’s focus on achieving sustainable 2% inflation, with potential rate adjustments tied to economic developments.

Technically, the USD/JPY pair trades near 157.80, maintaining bullish momentum within an ascending channel on the daily chart. The RSI hovers near overbought territory, with the pair eyeing resistance at its monthly high of 158.08 and potential further gains toward 160.60. Immediate support is found at the nine-day EMA around 156.79, with the lower boundary of the channel at 156.50 providing additional stability.

https://www.fxstreet.com/news/japanese-yen-receives-support-from-odds-of-boj-raising-rates-following-tokyo-cpi-202412300429

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