S&P 500 — US Large Cap Index
FTSE 100 — UK Blue Chips
Euro Stoxx 50 — Eurozone Leaders
DAX 40 — German Equities
CAC 40 — French Market Index
Nikkei 225 — Japan Benchmark
Hang Seng — Hong Kong Index
Shanghai Composite — China Mainland
ASX 200 — Australian Market
TSX Composite — Canada Index
Nifty 50 — India Large Cap
STI Index — Singapore Market
KOSPI — South Korea Index
Bovespa — Brazil Equities
JSE Top 40 — South Africa Index
IPC Index — Mexico Market- USD/JPY bulls pause for a breather amid fears of JPY intervention, though the downside appears limited.
- War-driven economic concerns continue to undermine the JPY and lend support to the currency pair.
- Inflation fears and hawkish Fed bets underpin the USD, further acting as a tailwind for the spot prices.
The USD/JPY pair consolidates around mid-159.00s during the Asian session on Thursday and remains within striking distance of its highest level since July 2024, touched earlier this month.
The Japanese Yen (JPY) continues with its relative underperformance amid concerns that the war-driven surge in energy prices would weigh on Japan’s trade balance and economic outlook. Furthermore, a sustained increase in Oil prices would drive up inflation and create a classic stagflationary environment, complicating the Bank of Japan’s (BoJ) normalization efforts. This, along with the underlying US Dollar (USD) bullish sentiment, acts as a tailwind for the USD/JPY pair.
Iran’s foreign minister said on Wednesday that Tehran is reviewing a US proposal to end the war but has no intention of holding talks to wind down the widening Middle East conflict. Furthermore, the deployment of additional US troops in the region points to the risk of a further escalation of the conflict and overshadows US President Donald Trump’s ceasefire rhetoric. Apart from this, hawkish US Federal Reserve (Fed) expectations benefit the USD and support the USD/JPY pair.
In fact, traders have nearly priced out the possibility of any further rate cuts by the Fed and are rapidly increasing bets for a hike by the end of this year. The hawkish outlook, along with persistent geopolitical uncertainties, continues to underpin the USD’s global reserve currency status and suggests that the path of least resistance for the USD/JPY pair is to the upside. However, intervention fears hold back the JPY bears from placing fresh bets and cap the upside for spot prices.
