USD/JPY price hits three-month high as Trump victory widens Fed-BoJ rate gap
Analysts eye 160.00 level for USD/JPY as Fed's hawkish stance propels dollar
USD/JPY surged to a three-month high touching 154.00, as Trump secured key state victories in Pennsylvania, Georgia, and North Carolina. This fresh momentum reinforced bullish sentiment around the currency pair, spurred by the widened interest rate gap between the Fed and the BoJ. The market is keeping a close watch on the 154.00 threshold, a critical level that, if breached convincingly, could set the stage for a march towards 157.00.
BoJ’s dovish stand adds to USD/JPY bullish case
Adding to this upside pressure, the BoJ remains firmly dovish despite inflation in Japan reaching multi-year highs. The gap between Japan’s stagnant rates and the Fed’s sustained hawkish stance has kept USD/JPY on its upward trajectory. Market participants view any potential intervention from the BoJ as short-lived, likely unable to counter the forces driving the yen’s weakness.
If the USD/JPY strengthens beyond 154.00, analysts are projecting a clear path towards the 160.00 big figure. This milestone would mark a significant extension of the bullish leg for USD/JPY to a multi-decade high above 162 if the Fed remains firm.
The Fed’s stance, alongside resilient U.S. data and heightened yields, continues to bolster the dollar. In addition, “Trump trade,” a term coined to reflect market confidence tied to Trump’s policy stance, has also underpinned dollar strength. In contrast, the BoJ’s reluctance to change its policy is making the yen vulnerable, unable to defend itself against the dollar’s gains.
As such, the path forward seems to favour the dollar, with the BoJ’s dovish script doing little to prevent yen weakness.
