Ella 
In early Asian trading on Wednesday, USD/JPY strengthened to around 154.75 for the third consecutive day. Talk of “higher interest rates for longer” in the U.S. continues to support the U.S. dollar (USD) and boost USD/JPY. However, further steps taken by the Japanese authorities to stem the current weakness in the yen may limit USD/JPY upside in the near term.
Minneapolis Fed President Neel Kashkari’s latest hawkish speech boosted the dollar. Kashkari said on Tuesday that if inflation does not recede, the Fed may keep interest rates on hold and leave the door open to raising the federal funds rate. The U.S. Federal Reserve decided last week to keep its benchmark interest rate stable between 5.25% and 5.50%. The Fed funds rate has been in this range since July 2023. Fed policymakers stressed the need for further clarity on the inflation outlook before lowering borrowing costs.
The Bank of Japan raised interest rates in March for the first time in 17 years, but still lags behind other global central banks, especially the Federal Reserve. Interest rate differentials between Japan and the United States have brought some selling pressure, making the yen less attractive.
Bank of Japan Governor Kazuo Ueda said on Tuesday that he would pay close attention to the weakness of the yen and would consider taking policy measures if the yen fell further against the dollar. Possible further FX intervention by Japanese authorities may temporarily limit the yen’s downside.
