- Japanese yen extends rally for a third consecutive day
- BoJ’s Uchida says rate hikes still on the table despite tariff concerns
- US nonfarm payrolls expected to edge slightly
The Japanese yen has extended its gains on Friday. In the European session, USD/JPY is trading at 147.79, down 0.13% on the day.
It was a light calendar in Japan this week but that didn’t stop the yen from taking advantage of a broadly weaker US dollar. The yen has posted gains of 1.9% against the US dollar this week and strengthened as much as 147.19 to the dollar, its best level since Sep. 2024.
Will US Tariffs Target Japan?
Central bankers are watching nervously as US President Donald Trump has escalated trade tensions by imposing tariffs on China and a host of other countries. The US is yet to target Japan but Trump has complained about nations that have a trade surplus with the US, which include Japan. This means that Japan is at risk for US tariffs, which would hurt Japan’s economy and likely boost inflation.
This turbulent backdrop could complicate the Bank of Japan’s plans to continue raising interest rates. Deputy-Governor Shinichi Uchida appeared to dispel these concerns in a speech on Wednesday. Uchida sounded upbeat about the economy and said that rate hikes would continue if the economy and inflation evolved according to the BoJ’s projections.
US Nonfarm Payrolls Expected to Rise Slightly
The market will be keeping a close eye on today’s US nonfarm payrolls. The labor market has been cooling down gradually, which is music to the ears of the Federal Reserve as it looks to guide the US economy to soft landing. The market estimate for February stands at 160 thousand, compared to 143 thousand in January. Wage growth is expected to rise 0.3% m/m in February, down from 0.5% in January. Annualized wage growth is expected to remain unchanged at 4.1%.
Only a few months ago, the market was expecting a series of rate cuts in 2025 from the Fed, but sticky inflation and solid economic growth have changed the rate outlook dramatically. The Fed is widely expected to hold rates at the March 19 meeting and there is a good chance that we won’t see any further rate cuts this year. The Fed’s rate path will largely depend on inflation and the strength of the labor market.
USD/JPY Technical
- 147.09 and 146.19 are providing support
- 148.21 and 149.11 are the next resistance lines