The Japanese Yen (JPY) rose by 0.3% against the US Dollar (USD), maintaining its position among G10 currencies and building on Friday’s positive trend. This comes after the Yen hit an 8-month low, as yield spreads tighten due mainly to cautious expectations from the Federal Reserve, while the outlook from the Bank of Japan remains steady. Market sentiment plays a strong role in the Yen’s performance. Its strength is seen in the relationship with risk, while there is some weakness in spread correlations. A recent vote by the Liberal Democratic Party (LDP) in Japan did not change expectations for the Bank of Japan, which adds more support to the Yen.

European And American Currency Movements

The EUR/USD pair held above 1.1600, supported by a weaker US Dollar amidst trade tensions. The GBP/USD climbed above 1.3400 but later pulled back. Its future movements will likely depend on comments from the Federal Reserve and the Bank of England. Gold prices stayed steady around $4,200 per troy ounce, boosted by global tensions and worries surrounding US-China trade relations. Bitcoin faced resistance in its recovery due to ongoing trade issues and a potential US government shutdown, with prices below $112,500. Lido DAO stabilized above $1.00 after the launch of its Lido V3 testnet, which aims to upgrade important contracts. The IMF slightly upgraded its global economic growth forecasts, despite lingering uncertainty. The Yen has made a strong comeback from its multi-month lows against the dollar. This strength connects directly to a softer outlook for the Federal Reserve, especially after last week’s US core inflation data for September, which showed a decrease to 2.8%. This trend continues from earlier in the year and is the key factor driving the currency markets.

Yield Spread Dynamics

A crucial support factor comes from the narrowing yield spreads between US Treasuries and Japanese Government Bonds. The US 10-year yield recently dropped to 3.95% from its high in August 2025, while the Bank of Japan maintains its ultra-loose policy, indicating no immediate changes. This situation reduces the appeal of carry trades that previously favored the dollar throughout 2024. Looking ahead, traders may want to consider buying USD/JPY put options to prepare for further declines. The recent drop below the 150 level—an important psychological support—suggests momentum could push the pair lower to the 147-148 range. Options expiring in November or December 2025 could capture this short-term movement. In addition to fundamentals, market sentiment is now a main factor, as the Yen is regaining its traditional status as a safe haven. The CBOE VIX index has risen to 22, indicating the ‘acute’ uncertainty described in the IMF’s latest World Economic Outlook. This risk-averse climate provides strong support for the Yen, regardless of interest rate differences. Create your live VT Markets account and start trading now.

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