Over the past 12 months, the Japanese Yen has continuously depreciated, falling by more than 10% to its lowest level since the 1980s, becoming the currency with the largest depreciation among major currencies. However, starting in July, the Yen showed a strong rebound against the dollar. On July 18, the Yen-dollar exchange rate surpassed the 156 Yen per dollar for the first time since June, rising to 155.37 Yen per dollar.

Impact of Federal Reserve Policy on the Japanese Yen

On July 10, Federal Reserve Chairman Jerome Powell testified before the U.S. House of Representatives' semiannual monetary policy report hearing, stating that recent data show signs of improvement in U.S. inflation. He mentioned that further positive data would bolster the Fed’s confidence in returning inflation to the 2% target, and no specific inflation figures are needed to determine rate cuts. The Fed's delay in cutting rates has led to a postponement in the market's expectations of the end of the dollar's strength. Powell’s remarks and U.S. Labor Department data convinced markets that the Fed might soon initiate a rate cut. On the evening of the 11th, the Yen quickly appreciated against the dollar from 161.76 to 157.43. This effect was almost identical to the Japanese central bank's intervention of 9.8 trillion Yen (about 840 billion SGD) in the forex market on April 29.

The USD/JPY exchange rate tends to follow the long-term U.S. Treasury yields, which dropped nearly 7 basis points overnight and continued to decline to 3.8329% during the Asian session, driving investors toward safer bonds. However, the dollar remains strong against most other major currencies, as it often attracts safe-haven flows even when U.S. economic concerns arise.

Statements from Trump and Japanese officials may also have contributed to the appreciation.

Trump recently mentioned in an interview that due to the Yen's weakness, the U.S. faces a “serious currency problem,” increasing the likelihood of potential actions to devalue the dollar if he wins the election this year. Japanese ruling party member Taro Kono also highlighted the issues brought by the Yen’s sharp depreciation, noting that since many Japanese companies have production facilities abroad, the current depreciation benefits Japan only marginally. He called for the central bank to raise interest rates to boost the Yen.

How to trade investments on uSMART:

After logging into uSMART SG APP, click "Search" from the upper right corner of the page, enter the target code, such as "JAPANESE Yen", and enter the details page to learn about transaction details and historical trends. Click "Trade" in the lower right corner and select "Buy/Sell" "Send" function, finally fill in the transaction conditions and send the order; the image operation instructions are as follows:

Follow us

Find us on Twitter, Instagram, YouTube, and TikTok for frequent updates on all things investing.

Have a financial topic you would like to discuss? Head over to the uSMART Community to share your thoughts and insights about the market! Click the picture below to download and explore uSMART app！

Important Notice and Disclaimer:

We have based this article on our internal research and information available to the public from sources we believe to be reliable. While we have taken all reasonable care in preparing this article, we do not represent the information contained in this article is accurate or complete and we accept no responsibility for errors of fact or for any opinion expressed in this article. Opinions, projections and estimates reflect our assessments as of the article date and are subject to change. We have no obligation to notify you or anyone of any such change. You must make your own independent judgment with respect to any matter contained in this article. Neither we or our respective directors, officers or employees will be responsible for any losses or damages which any person may suffer or incur as a result of relying upon anything stated or omitted from this article.

This document should not be construed in any jurisdiction as constituting an offer, solicitation, recommendation, inducement, endorsement, opinion, or guarantee to purchase, sell, or trade any securities, financial products, or instruments or to engage in any investment or any transaction of any kind, nor is there any intention to solicit or invite the purchase or sale of any securities.

The value of these securities and the income from them may fall or rise. Your investment is subject to investment risk, including loss of income and capital invested. Past performance figures as well as any projection or forecast used in this article is not indicative of its future performance.

This advertisement has not been reviewed by the Monetary Authority of Singapore