The USDJPY Exchange rate was lower after a strong bid for a Japanese bond auction soothed markets.
USDJPY – Day Chart
The 2025 high in USDJPY was just above 159.00. The correction target would be the 151.00 level.
The Japanese government bond market was steadier after a solid 10-year yield auction halted a recent panic. A bid-to-cover ratio of nearly 3.6 was the highest since September, and the gap to the market’s pre-sale level was minimal. The benchmark yield strengthened just below a 17-year high to 1.86%.
Global bonds have been volatile since Bank of Japan Governor Kazuo Ueda outlined a plan for an interest rate hike in December. He said policymakers would be weighing the “pros and cons” of a move, but his comments may have been an effort to cool the recent decline in the yen.
Rising yields in Japan are causing traders to worry that the world’s biggest creditor nation could slow its demand for foreign debt. The auction result may also signal that Japanese investors are staying closer to home. Australian bonds remained under pressure, while U.S. Treasuries were strong. Cryptocurrencies also rebounded after a recent sharp slowdown.
However, there are still longer-term pressures driven by Japan’s debt load as 20-year yields hit 2.92%- the highest level since 1998.
The U.S. dollar has lost some strength amid expectations of a Federal Reserve rate cut this month. Recent economic numbers have been weaker, and that could be the green light for a reduction in borrowing costs, which the President has been pushing for.
Donald Trump said on Tuesday that he will announce early next year who will succeed Jerome Powell as chair of the U.S. central bank. Rates could fall ahead of that process amid weaker investor demand for the U.S. dollar. Trump was very vocal in his desire for lower rates and will choose the most dovish policymaker for the role.
