[Forex] The stagnant Dollar/Yen exchange rate, when will it start moving? | Hiroko Ohashi's Understanding! Getting to Know FX for the First Time | Moneyクリ MoneyCube Securities' Investment Information and Media Useful for Money

Dollar/Yen, a charging period is needed before the next trend occurs

The USD/JPY exchange rate has completely stagnated. After reaching a high of 158.87 yen in January 2025, the yen peaked at 139.88 yen during the Trump tariff shock in April. While it is true that there was a 19 yen appreciation of the yen in the first half of 2025, it can also be noted that the U.S. did not change its policy interest rates in the first half of 2025.

Since April, the market has been in a box range of 142 to 148 yen, but due to a significant 20 yen appreciation trend over the past three months, some energy recharge period is needed for the next trend to emerge.

Speculators Maintain Yen Appreciation Expectations

Speculators' positions remain biased towards a net long in yen, and their expectations for a stronger yen have not changed. However, by May, the long positions in yen had swelled to a record high of 179,000 contracts, reaching a point where there was no more room to buy yen.

Currently, this inflated speculative position has been somewhat reduced to 127,000 contracts (the reduction of yen-buying positions equals pressure for yen depreciation), but there are still over 100,000 contracts piled up. Speculators likely believe that this BOX market will break downwards, creating a new trend towards yen appreciation.

US and Japan's Monetary Policy, US-Japan Interest Rate Gap Remains Stagnant

The background to this is the expectation of a narrowing interest rate differential between the U.S. and Japan due to the resumption of interest rate cuts in the U.S. and the Bank of Japan's interest rate hikes. The Bank of Japan has become cautious since implementing its second interest rate hike in January, and the timing of the next rate hike remains uncertain. In addition to external factors such as Trump tariffs, the May economic trend index has been downgraded to "deterioration" for the first time since July 2020. The actual situation of the Japanese economy is becoming one where it cannot accept interest rate hikes.

In addition, the United States began its first interest rate cut in September 2024, and subsequently announced rate cuts in the FOMC (Federal Open Market Committee) meetings in November and December. However, the rate cuts have been halted since entering 2025. The FRB Chairman has mentioned the possibility that the impact of Trump tariffs may manifest as inflation after the summer of 2025, and is maintaining high interest rates without yielding to pressure for rate cuts from President Trump.

The narrowing of the interest rate differential between Japan and the United States is not progressing as expected, and the stagnation of the interest rate differential is contributing to the stagnation of the Dollar/Yen.

When will the US Dollar / Yen start moving?

When will the USD/JPY start moving? If there is a clear deterioration in US economic indicators and a further decline in US stocks, the Fed will likely move to resume rate cuts. In that sense, hard data such as employment statistics are very important, but the numbers for June were so good that ultimately the market remains in a state of stagnation.

However, the labor market tends to worsen after summer, so attention should be paid to the employment statistics in August and September. Will the Dollar/Yen start to move significantly again around that time?