USD/JPY rebounds as US Dollar strengthens, BoJ hawkishness tempers upside potential

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USD/JPY trades around 158.70 on Friday at the time of writing, up 0.61% on the day, staging a clear rebound after Thursday’s sharp decline. The move comes as the US Dollar (USD) regains traction following a bout of volatility, with markets reassessing the outlook for US monetary policy.

USD/JPY advances after a sharp pullback, supported by a rebound in the US Dollar.
The Bank of Japan maintains a hawkish bias but remains cautious amid economic risks.
Expectations of a Fed pause support the Greenback in a context of global uncertainty.

Support for the Greenback is driven by expectations of a prolonged pause from the Federal Reserve (Fed). The central bank kept rates within the 3.50%-3.75% range and highlighted elevated uncertainty linked to geopolitical tensions, while fewer policymakers now anticipate rate cuts this year. According to the CME FedWatch tool, markets largely expect rates to remain unchanged through year-end, underpinning the US Dollar (USD).

In this context, the US Dollar Index (DXY) rebounds toward the 99.50 area, reflecting renewed demand for the US currency. Analysts at BBH note that energy shock-related stress and Middle East tensions are supporting the USD, driven by increased liquidity demand during periods of financial stress. MUFG shares this view, arguing that rises in Oil prices could further extend the US Dollar’s gains.

On the Japanese side, the Bank of Japan (BoJ) maintained a hawkish stance, helping to limit downside pressure on the Japanese Yen (JPY). Governor Kazuo Ueda stated that a rate hike remains possible if the economic slowdown linked to Middle East tensions proves temporary. However, the central bank warned about uncertainty surrounding growth, particularly due to rising energy costs.

Meanwhile, the geopolitical backdrop remains a key driver. Escalating tensions involving the United States (US), Israel and Iran continue to fuel risk aversion, which could typically support the JPY as a safe-haven asset. In the near term, however, monetary policy divergence and the resilience of the USD dominate the pair’s direction.

US Dollar Price Today

The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the strongest against the Japanese Yen.

	USD	EUR	GBP	JPY	CAD	AUD	NZD	CHF
USD		0.15%	0.33%	0.60%	-0.21%	0.13%	0.10%	-0.28%
EUR	-0.15%		0.17%	0.46%	-0.36%	-0.02%	-0.06%	-0.43%
GBP	-0.33%	-0.17%		0.30%	-0.51%	-0.19%	-0.23%	-0.60%
JPY	-0.60%	-0.46%	-0.30%		-0.81%	-0.48%	-0.51%	-0.87%
CAD	0.21%	0.36%	0.51%	0.81%		0.34%	0.31%	-0.07%
AUD	-0.13%	0.02%	0.19%	0.48%	-0.34%		-0.04%	-0.41%
NZD	-0.10%	0.06%	0.23%	0.51%	-0.31%	0.04%		-0.37%
CHF	0.28%	0.43%	0.60%	0.87%	0.07%	0.41%	0.37%

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).

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