Yen Holds Strong Against Dollar as Rate Hike Hopes Grow
The Japanese yen stayed strong on Tuesday, trading near its highest level in a week against the U.S. dollar. This strength comes from two main reasons—one is global news, and the other is what the Bank of Japan (BoJ) might do next.
Recently, tensions in the Middle East have reduced a bit, which usually makes investors feel safer. When there is less fear, people invest in riskier assets instead of safe ones like the yen. But despite this, the yen remained strong.
The bigger reason for the yen’s strength is the growing belief that the Bank of Japan might raise interest rates again. Some members of the BoJ are worried about rising inflation in Japan. Prices of goods and services, especially in the services sector, are increasing more than expected. Because of this, the BoJ may decide to raise rates sooner than planned to keep inflation under control.
In terms of trading, the yen may face resistance if it weakens and moves toward 147 or 148 per U.S. dollar. But if it stays strong and drops below the 144.50 level, it might fall further toward 143.
Impact:
The yen could remain strong if inflation in Japan stays high. But if the U.S. talks more about cutting interest rates, the yen might face some pressure.