USD/JPY: Yen hits one-week high amid risk-off mood

Key points

Japan’s Yen strengthened on Thursday, while hitting a one-week high against the US Dollar, as it was underpinned amid broad risk aversion in Asia.

Usually, the Yen, along with the US Dollar, is considered as being a safe haven currency.

“(The yen) was stronger on risk-off mode as fears of additional tightening may weigh on growth, risk assets,” Christopher Wong, currency strategist at OCBC, was quoted as saying by Reuters.

“This is largely in line with our caution that worries of global growth concerns and rates staying higher for longer remain intact and may well curb risk appetite.”

Meanwhile, the US Dollar remained firm and US Treasury yields rose, after the minutes of the Federal Reserve’s June meeting showed that some FOMC members voted in favor of raising interest rates by 25 basis points.

All FOMC participants continued to maintain the view that a restrictive policy stance would be appropriate, with inflation remaining well above the Fed’s 2% inflation target and US labor market still very tight.

Almost all FOMC members saw the need for more rate increases this year, the minutes showed.

“It heightened the impression that the June pause was an interim one,” Alvin Tan, head of Asia FX strategy at RBC Capital Markets, commented.

The Federal Reserve kept the target range for the federal funds rate unchanged at 5.00%-5.25% last month, while Fed Chair Jerome Powell has on several occasions stressed on the need to raise borrowing costs further this year.

Futures markets are now pricing in an 89% chance of a 25 basis point interest rate increase at the Fed’s policy meeting later in July, according to CME’s FedWatch tool.

As of 9:21 GMT on Thursday USD/JPY was edging down 0.43% to trade at 144.031. During the early phase of the European trading session the major Forex pair went down as low as 143.553. The latter has been the pair’s weakest level since June 27th (143.281).