The US Dollar has become stronger compared to the Japanese Yen, reaching around 158.30 during early Asian trading on Thursday. This increase comes from positive news about a framework deal involving Greenland, as mentioned by US President Donald Trump, which eases concerns about tariffs. Later on Thursday, the US will release GDP data for the third quarter along with other reports. If the results are better than expected, they could further boost the US Dollar.

Bank Of Japan’s Monetary Policy

The Bank of Japan is likely to keep its interest rates the same during its meeting that ends on Friday. If BoJ Governor Kazuo Ueda hints at possible future rate hikes, it could affect the Yen’s value. The performance of the Yen is greatly influenced by Japan’s economy and the difference in bond yields between Japan and the US. The BoJ’s past policies have weakened the Yen, but recent changes are beginning to provide some support. Worldwide, the Yen is seen as a safe-haven currency. When the market is unstable, its reliability makes it more appealing, which can raise its value against riskier currencies. The news about the Greenland deal is giving short-term strength to the US Dollar, pushing the USD/JPY rate over 158.00. This development lowers geopolitical risks, which usually weakens the safe-haven Yen. For now, this optimism helps the US Dollar continue its upward trend.

Resilient US Economy

This trend is supported by a strong US economy, with recent data from late 2025 showing core inflation above 3% and a stable job market. The US 10-year Treasury yield remains above 4%, which keeps the interest rate gap with Japan wide. This outlook continues to favor holding US dollars over Yen. However, the main focus this week is the Bank of Japan meeting tomorrow. While we don’t expect another rate hike so soon after December 2025, Governor Ueda’s press conference poses a significant risk. Any indication of an earlier rate increase could lead to a quick rise in the Yen’s value. Given the uncertainty surrounding the BoJ meeting, we suggest that traders consider buying volatility. Strategies like a short-term straddle could work well, as they would profit from a large price movement in either direction after Ueda’s comments. This approach helps protect against sudden policy changes. Looking back, the BoJ has slowly been working towards normalizing its policy since it began changing in 2024. The gap between US and Japanese bond yields, while still large, has started to narrow. In the coming weeks, we will keep an eye on whether this trend continues, which could put downward pressure on the USD/JPY rate. Create your live VT Markets account and start trading now.

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