USD\/JPY was little changed on Tuesday after the US Presidents\u2019 Day weekend, hovering near 153.40 after dipping to about 152.70. Price action was mixed as the US Dollar struggled to extend its rebound.<\/p>\n
The Yen stayed supported across markets amid expectations of a Bank of Japan rate rise in the coming months. Attention also remained on Prime Minister Sanae Takaichi\u2019s pro-stimulus policy agenda.<\/p>\n
US data gave the Dollar mild support: the NY Empire State Manufacturing Index rose to 7.1 in February versus 6 expected, down from 7.7. The ADP Employment Change four-week average increased to 10.3K from a revised 7.8K (previously 6.5K).<\/p>\n
The US Dollar Index traded near 97.24 after an intraday high of 97.54. Recent data showed Nonfarm Payrolls up 130K in January versus December\u2019s revised 48K, with unemployment at 4.3% from 4.4%.<\/p>\n
US CPI rose 0.2% month-on-month from 0.3%, and eased to 2.4% year-on-year from 2.7%. Fed Governor Michael Barr said he wants more evidence inflation is moving to 2%, and noted a stabilising jobs market.<\/p>\n
Markets price in two cuts this year, with rising odds of a third; the December dot plot showed one cut in 2026. CME FedWatch points to a first cut as early as June.<\/p>\n
Japan\u2019s focus is Friday\u2019s National CPI, while the US has Fed minutes on Wednesday, then core PCE and Q4 GDP on Friday.<\/p>\n
A year ago, we were looking at USD\/JPY near 153.40, with sentiment favouring a stronger yen due to expected Bank of Japan (BoJ) rate hikes. At that time in early 2025, the market was also pricing in at least two Federal Reserve rate cuts. The prevailing view was that the policy gap between the US and Japan was set to narrow.<\/p>\n
The actual events unfolded very differently, with the pair now trading around 168.50. The Federal Reserve only delivered one rate cut in late 2025 as inflation remained sticky, with the most recent January 2026 CPI report showing core inflation at a stubborn 2.8% year-over-year. Meanwhile, the BoJ\u2019s exit from negative rates proved to be a one-off move to 0.10%, failing to provide the yen with sustained strength.<\/p>\n
This divergence has pushed implied volatility in the yen to its highest levels since 2023, presenting a clear opportunity for options traders. We should consider purchasing volatility through structures like long straddles, which would profit from a large price move in either direction. These strategies are well-suited for an environment where central bank policy remains uncertain.<\/p>\n
Furthermore, the interest rate differential between the US Fed Funds Rate at 5.00-5.25% and Japan’s 0.10% is much wider than we anticipated last year. This makes the carry trade highly profitable, rewarding those who are long USD and short JPY. Derivative traders can use forward contracts or currency futures to efficiently capture this yield difference over the coming weeks.<\/p>\n
Looking ahead, we must focus on the upcoming US core Personal Consumption Expenditures (PCE) data for clues on inflation’s trajectory. A higher-than-expected number would likely push USD\/JPY even further as it would delay any new Fed rate cut expectations. Conversely, a soft reading could trigger a sharp, albeit perhaps temporary, correction in the pair.<\/p>\n
Create your live VT Markets account<\/a>\u00a0and\u00a0start trading<\/a>\u00a0now. <\/b><\/p>\n","protected":false},"excerpt":{"rendered":" USD\/JPY steadied near 153.40 as BOJ hike hopes supported yen; US data boosted dollar slightly.<\/p>\n","protected":false},"author":62,"featured_media":17052,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[59],"tags":[],"class_list":["post-42120","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-live-updates"],"acf":{"acf_article_selection_author":null},"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts\/42120","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/users\/62"}],"replies":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/comments?post=42120"}],"version-history":[{"count":0,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts\/42120\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/media\/17052"}],"wp:attachment":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/media?parent=42120"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/categories?post=42120"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/tags?post=42120"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}