The Japanese yen appreciated against the U.S. dollar and the euro on January 16, 2025, as markets anticipated a potential interest rate hike by the Bank of Japan (BoJ) in its upcoming policy meeting. The yen rose 0.25% against the dollar, reaching 155.21, its highest level since December 19, 2024, and gained 0.24% against the euro, trading at 160.63.
Remarks from BoJ Governor Kazuo Ueda and Deputy Governor Ryozo Himino indicated that a rate increase will be discussed, with markets pricing in a 78% chance of a 25 basis point hike. Analysts suggest that expectations of tightening monetary policy will bolster the yen, although movements may remain limited ahead of Donald Trump’s presidential inauguration.
In contrast, the U.S. dollar steadied despite a decline in U.S. bond yields following the release of December inflation data, which showed core inflation at 4.2%, slightly below forecasts. The U.S. dollar index edged up 0.05% to 109.09.
Market participants are also closely monitoring the nomination hearing of Scott Bessent for Treasury Secretary, as his policies are expected to influence U.S. fiscal strategies. Meanwhile, the Israeli shekel reached a one-month high amid ongoing geopolitical developments.
Overall, the yen's performance reflects a broader sentiment of cautious optimism regarding Japan's economic outlook as traders prepare for the BoJ's decisions next week.