Forex pair: The Japanese Yen drops to a new low against the strong US dollar

On Wednesday, the Japanese Yen (JPY) continues to underperform amid uncertainty regarding the timing and pace of future rate hikes by the Bank of Japan (BoJ). Forex pair USD/JPY benefits from rallying US Treasury bond yields and sustained US Dollar strength.

Strong US dollar sends yen to 3-month new low

The Japanese Yen (JPY) continues to struggle on Wednesday amid uncertainty surrounding the Bank of Japan's (BoJ) future rate hikes. Despite recent verbal interventions from Japanese officials and a generally weaker risk sentiment that typically favors the safe-haven JPY, bullish sentiment remains strong. Meanwhile, sustained interest in the US Dollar (USD) drives the USD/JPY pair to 152.35, its highest point since July 31.

The USD Index (DXY), which measures the Greenback against a basket of currencies, reaches its highest level since early August, fueled by expectations for a less aggressive Federal Reserve policy easing. Concerns over deficit spending following the November 5 US Presidential election also support rising US Treasury bond yields, hitting their highest in nearly three months, which bodes poorly for the lower-yielding JPY and suggests further gains for the USD/JPY pair.

Japanese Yen bears remain in control

The Japanese Yen has fallen to its weakest point in nearly three months against the US Dollar, fueled by uncertainty surrounding the Bank of Japan's rate-hike plans. JPY bears appear undeterred by recent verbal interventions from Japanese officials, particularly after the Yen slid below the critical 150.00 psychological level.

Expectations of slower rate cuts by the Federal Reserve, along with concerns about rising fiscal deficits following the US Presidential election, have triggered a selloff in the bond market. Consequently, the yield on the benchmark 10-year US government bond has risen to levels not seen since July, propelling the US Dollar to its highest point since early August. San Francisco Fed President Mary Daly emphasized that the economy is in a stronger position, with inflation declining and the labor market stabilizing.

Odds are increasingly favoring former President Donald Trump in next month's US election, raising concerns about potential inflationary tariffs. As markets brace for a possible Israeli strike on Iran, Hezbollah launched rockets at two bases near Tel Aviv and a naval facility west of Haifa on Tuesday.

Diplomatic efforts have yet to resolve the year-long Middle Eastern conflict, dampening investors' interest in riskier assets. Traders are now awaiting the release of US Existing Home Sales for momentum, while attention remains on BoJ Governor Kazuo Ueda's speech at the IMF-hosted "Governors Talk." The focus will then shift to Tokyo's consumer inflation data on Friday, which could impact the JPY ahead of Japan's general election.

In conclusion, the Japanese Yen has fallen to a new low against the strong US Dollar, reflecting ongoing economic uncertainties and the impact of external factors, such as rate hike speculation and geopolitical tensions. This trend underscores the challenges facing the Yen in the current market environment.

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Past performance is not indicative of any future results. This information is provided for informative purposes only and should not be construed to be investment advice.