Japanese Yen underperforms amid rising trade concerns
The Japanese Yen (JPY) is down against its major currency peers on Thursday, with USD/JPY trading 0.22% higher at around 158.50 during the European trading session. The Japanese currency underperforms as the Trade Deficit widens due to elevated energy prices.
The Japanese Yen (JPY) experienced underperformance on Thursday, with the USD/JPY pair rising by 0.22% to approximately 158.50 during the European trading session. The primary reason for this decline is the widening trade deficit, which is attributed to soaring energy prices. According to the Ministry of Finance (MoF) report, the trade deficit increased to JPY 634.5 billion from JPY 409.9 billion.
Analysts predict further widening to JPY 680 billion. Imports surged by 27.8% in comparison to the same month a year ago, reaching a seasonally adjusted JPY 12.15 trillion, while exports grew robustly by 23.2%, outperforming estimates of 19.9%. Despite this, the Bank of Japan (BoJ) remains poised to raise interest rates in the upcoming September meeting, according to financial markets' expectations.
Standard Chartered analysts have revised their outlook for Bank of Japan policy tightening, anticipating a 25 basis points hike on September 18, followed by two more 25 basis points hikes in Q1 and Q3 of 2027. The US Dollar Index (DXY) is facing pressure due to a sharp decline in US Treasury yields, as the US Treasury Department announced plans to double its long-term bond-buying to curb high borrowing costs.
The USD/JPY pair currently trades at 158.43, with a bearish near-term bias, as it trades below the 20-day Exponential Moving Average (EMA) of 159.59. Immediate resistance for any recovery attempts is located at the 20-day EMA, and a sustained break above this level would ease the current downside bias.
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