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Yen rises supported by Japan's economic growth.
The Japanese yen saw a notable rise in the foreign exchange markets during Monday's trading session, reaching its highest level in a week against the U.S. dollar in the Asian market. This surge was driven by strong buying activity for the yen as a safe-haven investment amid global economic uncertainties.
Japanese Yen Price Performance Today
The U.S. dollar weakened against the yen, declining by 0.45% to ¥151.50, marking its lowest level since February 10. This was compared to the opening price of ¥152.20, while the highest level recorded was ¥152.38. On a weekly basis, the yen suffered a 0.6% loss after four consecutive weeks of gains.
Japan’s Economic Growth Supports Yen Gains
Data from Japan’s Ministry of Trade revealed that the GDP grew by 0.7% in Q4 2024, surpassing analysts' expectations of 0.3%. This stronger-than-expected growth has increased pressure on the Bank of Japan (BoJ) to make key monetary policy decisions in its upcoming meeting.
Japanese Interest Rate Expectations
Following the release of positive economic data, the likelihood of the Bank of Japan raising interest rates by 0.25% in its March meeting has increased from 75% to 80%. However, investors are closely monitoring further inflation, employment, and wage data before the March policy decision.
Interest Rate Gap and Its Impact on USD/JPY
The interest rate gap between the U.S. and Japan remains steady at 400 basis points, favoring the U.S. Federal Reserve. A narrowing of this gap could strengthen the Japanese yen, while a continued or widening gap may push the U.S. dollar higher against the yen.
