Ella 
The yen opened firmer against the dollar on Monday, extending Friday’s strong gains and extending its slide to near three-week lows around the 146.25-146.20 area. Escalating conflicts in the Middle East and worries about another respiratory disease outbreak in China have dampened appetite for riskier assets. This is due to market speculation that the Bank of Japan’s policy stance will undergo a major shift early next year, which has also become a key factor in enhancing the relative safe-haven status of the yen.
Meanwhile, yen bulls appear unfazed by recent hawkish comments from Bank of Japan policymakers, who said it was too early to discuss exiting negative interest rates. On the other hand, growing bets that the Federal Reserve (FED) will keep on hold at its December policy meeting and start cutting interest rates in the first half of 2024 continue to weaken the dollar. Even Federal Reserve Chairman Jerome Powell’s attempt on Friday to temper rate cut expectations failed to bring any respite to the greenback and ease the bearish pressure on USD/JPY.
The focus now turns to key U.S. macro data due out at the beginning of the month, including the closely watched U.S. non-farm payrolls data, for some clear push. In other words, the above fundamental background shows that the USD/JPY exchange rate has the least downward resistance. This in turn supports the prospect of a sharp retracement in USD/JPY from its year-to-date high near 152.00 hit in November, while U.S. economic data was weak on Monday, with only factory orders data released.
