The Japanese yen (JPY) pared some of its strong intraday gains against its US counterpart, lifting the USD/JPY pair back above the 156.00 level heading into the European session on Thursday (16/1). Expectations that the Federal Reserve (Fed) could cut interest rates twice this year, coupled with easing concerns about disruptive trade tariffs from US President-elect Donald Trump, remained supportive of the risk sentiment. This turned out to be a key factor undermining the safe-haven JPY and helped the pair find decent support ahead of the 155.00 psychological mark.
Additionally, the emergence of some US Dollar (USD) buying, supported by growing acceptance that the Fed will pause its rate-cutting cycle later this month, extended some support to the USD/JPY pair. However, a meaningful JPY depreciation seems elusive amid speculations of a Bank of Japan (BOJ) rate hike next week. Expectations pushed the Japanese Government Bond (JGB) yields to multi-year highs. In contrast, US Treasury yields fell after tame US inflation data, narrowing the US-Japan yield differential, which could further lend support to the JPY.(AL)
Source: FXstreet
