Yahoo News USD/JPY Fundamental Daily Forecast – Investors Continue to Buy Higher-Yielding Dollar, Shed Safe-Haven Yen
The Dollar/Yen is inching higher on Friday on light volume. Japan is on a bank holiday and the U.S. financial markets are essentially on hold ahead of the New Year’s holiday weekend. Nonetheless, the Forex pair is being supported by demand for the higher-yielding U.S. Dollar and the shedding of the safe-haven Japanese Yen.
The Forex pair was basically underpinned by better-than-expected economic data, demand for riskier assets and the interest-rate differential between U.S. Government bond yields and Japanese Government bond yields.
Longer-term, it’s the bullish divergence between the hawkish U.S. Federal Reserve and the dovish Bank of Japan (BOJ) providing all the support the Dollar/Yen needs.
At 11:11 GMT, the USD/JPY is trading 115.099, up 0.025 or +0.02%. On Thursday, the Invesco CurrencyShares Japanese Yen Trust ETF (FXY) settled at $81.51, down $0.07 or -0.09%.
Underlying Factors Supporting the Rally
The dollar ticked higher against the Japanese Yen in holiday-thinned trading Thursday as a dip in weekly jobless claims data helped ease fears that a surge of COVID-19 infections would curb the economic recovery.
New claims for U.S. unemployment benefits fell in the week leading up to Christmas and benefits rolls slid to their lowest level of the pandemic era the previous week, data showed, signaling no impact on employment from the rapidly spreading Omicron variant. The dip in jobless claims came even as COVID-19 infections in the United States hit a record high for the second day running, Reuters data showed.
The better-than-expected report initially drove up demand for riskier assets, helping to lift the S&P 500 and Dow Jones Industrial Average indexes to all-time highs on Thursday, extending their record-setting runs before they receded in late trading.
The optimism created by the economic news and the stock market rally allowed the higher-yielding U.S. Dollar to pull away from the safe-haven Japanese Yen.
Today’s Outlook
We’re likely to see a choppy trade but it all depends on what investors want to do with Treasurys and Equities. There will be no new economic data out on Friday.
As we start the new year, there is some positive news. Some developments with the omicron COVID variant have steadied investor sentiment. The president’s top medical advisor Dr. Anthony Fauci on Wednesday predicted that the latest wave of the coronavirus pandemic may hit its peak in the U.S. by the end of January.
For a look at all of today’s economic events, check out our economic calendar.
This article was originally posted on FX Empire
