Yen strength has continued to persist, supported by an increase in Tokyo’s core-core inflation rate to 1.9% y/y in November. This has led to speculation that the Bank of Japan (BoJ) may hike its short-term policy interest rate at the upcoming December meeting.
One factor contributing to the potential yen strength revival is the demand for safe-haven currencies amid uncertainties in the FX market. The USD/JPY pair has reflected this trend by dropping below the 150.00 level to reach a six-week low of 149.80.
The recent uptick in Tokyo’s inflation data for November, particularly the core-core inflation rate excluding food and energy components, indicates a steady rise to 1.9% y/y. This suggests an increase in demand-side inflation and services-sector prices in Tokyo, reflecting broader price pressure and sustained wage gains.
The BoJ’s monetary policy meeting in December is now being closely watched, especially after the central bank ended its negative interest rates earlier this year. Market participants are anticipating a potential interest rate hike as indicated by the widening spread of Japan’s overnight indexed swap rates.
In terms of technical analysis, the USD/JPY pair has broken below its 50-day moving average with bearish momentum. A break below the 149.30 support level could trigger a medium-term corrective decline, with further support levels at 144.80 and 140.25. However, a move above the 154.70 resistance level could invalidate the bearish scenario.
Overall, the potential for yen strength and the upcoming BoJ meeting are key factors influencing the USD/JPY pair. Traders and investors will be monitoring these developments closely to gauge the future direction of the currency pair.
