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The Japanese Yen retreated further from a multi-week high touched against the USD on Monday. Trump’s tariff threats, rebounding US bond yields and modest USD strength support USD/JPY. The divergent BoJ-Fed expectations might keep a lid on any further upside for the currency pair. The Japanese Yen (JPY) attracts heavy selling during the Asian session on Tuesday and moves away from a six-week high touched against its American counterpart the previous day. Investors remain concerned about the potential economic fallout from US President Donald Trump’s trade policies, which, in turn, is seen undermining the JPY. Apart from this, a goodish rebound in the US Treasury bond yields turns out to be another factor driving flows away from the lower-yielding JPY.  This, along with a solid US Dollar (USD) recovery from its lowest level since December 18 touched on Monday lifts the USD/JPY pair back closer to the mid-155.00s. Any meaningful JPY depreciation, however, seems elusive in the wake of bets that the Bank of Japan (BoJ) will hike interest rates further. In contrast, the Federal Reserve (Fed) is expected to cut interest rates twice this year, which, in turn, could act as a headwind for the US bond yields, the USD and the currency pair.  Japanese Yen weakens after Trump’s tariff threats; hawkish BoJ expectations could limit losses US President Donald Trump said he would soon impose tariffs on producers of pharmaceuticals and computer chips in the near future. I will also place tariffs on aluminum and copper, and look at steel and other industries for tariffs. This comes after Trump ordered his administration to impose emergency 25% tariffs on Colombian imports, though the duties were put on hold after the latter agreed to unrestricted acceptance of all illegal migrants returned from the US. The Financial Times reported on Monday…

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Filed under: News - @ January 28, 2025 3:23 am