Japanese Yen gains ground on Trump’s Hormuz pause, intervention caution

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The USD/JPY pair loses ground to around 157.65 during the Asian trading hours on Wednesday. The US Dollar (USD) weakens against the Japanese Yen (JPY) after US President Donald Trump announces a pause on 'Project Freedom' in the Strait of Hormuz.

USD/JPY softens to near 157.65 in Wednesday’s Asian session.
Trump said he is pausing the operation that helps ships leave the Strait of Hormuz.
Traders remain cautious after suspected intervention.

Trump said on Tuesday that Iran and the US have mutually agreed that while the US blockade “will remain in full force and effect," Project Freedom will be paused. Trump further stated that this was to see if an agreement between the two countries can be finalized and signed. US President noted the decision was made at the request of Pakistan and other countries and follows what he called “tremendous military success” during a US campaign against Iran.

Markets remain on high alert following suspected interventions by Japanese authorities. Japanese Finance Minister Satsuki Katayama said Japan can take action against speculative foreign-exchange movements. "It's probably going to take another round of significant intervention to push the dollar more significantly lower," said Shaun Osborne, chief currency strategist at Scotiabank.

The US employment data for April will be in the spotlight on Friday. This report could influence interest rate expectations and the pair’s next move. Economists expect the US economy to have added 60,000 jobs in April, while the Unemployment Rate is estimated to hold steady at 4.3 during the same period. Any signs of improvement in the US labor market could lift the Greenback against the JPY in the near term.

Japanese Yen FAQs

What key factors drive the Japanese Yen?

The Japanese Yen (JPY) is one of the world’s most traded currencies. Its value is broadly determined by the performance of the Japanese economy, but more specifically by the Bank of Japan’s policy, the differential between Japanese and US bond yields, or risk sentiment among traders, among other factors.

How do the decisions of the Bank of Japan impact the Japanese Yen?

One of the Bank of Japan’s mandates is currency control, so its moves are key for the Yen. The BoJ has directly intervened in currency markets sometimes, generally to lower the value of the Yen, although it refrains from doing it often due to political concerns of its main trading partners. The BoJ ultra-loose monetary policy between 2013 and 2024 caused the Yen to depreciate against its main currency peers due to an increasing policy divergence between the Bank of Japan and other main central banks. More recently, the gradually unwinding of this ultra-loose policy has given some support to the Yen.

How does the differential between Japanese and US bond yields impact the Japanese Yen?

Over the last decade, the BoJ’s stance of sticking to ultra-loose monetary policy has led to a widening policy divergence with other central banks, particularly with the US Federal Reserve. This supported a widening of the differential between the 10-year US and Japanese bonds, which favored the US Dollar against the Japanese Yen. The BoJ decision in 2024 to gradually abandon the ultra-loose policy, coupled with interest-rate cuts in other major central banks, is narrowing this differential.

How does broader risk sentiment impact the Japanese Yen?

The Japanese Yen is often seen as a safe-haven investment. This means that in times of market stress, investors are more likely to put their money in the Japanese currency due to its supposed reliability and stability. Turbulent times are likely to strengthen the Yen’s value against other currencies seen as more risky to invest in.