Yen Strengthens on Hopes of a BoJ Rate Hike

The Japanese yen climbed against major currencies during Thursday’s European trading session as traders increasingly expect the Bank of Japan to raise interest rates in response to emerging inflation trends in Japan.

Investors are also anticipating key inflation data from both Japan and the United States, scheduled for release on Friday, which could further sway market sentiment.

Adding to the mix, rumors that U.S. President Donald Trump once considered replacing Federal Reserve Chair Jerome Powell have supported the view of the yen as a safe haven, while raising questions about the central bank’s future independence.

During the European session, the yen reached a two-day high of 179.61 against the Swiss franc, a ten-day high of 143.75 versus the U.S. dollar, and nearly a two-week low of 105.04 against the Canadian dollar—recovering from early lows of 180.36, 144.97, and 105.74, respectively. If the upward trend continues, resistance levels may appear around 177.00 for the franc, 142.00 for the dollar, and 104.00 for the loonie.

Similarly, the yen edged up against the euro and the British pound, settling at 168.56 and 197.71 from early lows of 169.40 and 198.60. Resistance is expected near 165.00 for the euro and 193.00 for the pound.

Against the Australian and New Zealand dollars, the yen improved slightly—trading at 94.07 and 87.16 respectively after initial lows of 94.61 and 87.78. The next resistance levels are around 93.00 for the Australian dollar and 85.00 for the New Zealand dollar.

Looking ahead, several important economic releases in New York are on the calendar, including Canada’s average weekly earnings for April, wholesale sales data for May, U.S. durable goods orders for May, first-quarter GDP, the Chicago Fed National Activity Index for May, U.S. goods trade balance for May, wholesale inventories for May, weekly jobless claims, and first-quarter U.S. PCE prices.