Yen Slides as US Treasury Yields Push Dollar Higher

USD/JPY Gains Amid Dollar Strength: The Japanese yen weakened against the US dollar on Tuesday, pushing the USD/JPY pair up by approximately 0.3%. The yen came under clear pressure during US trading hours as a strong dollar and rising US Treasury yields made dollar-denominated assets more attractive compared to the yen.

Investors increased long positions in the dollar against the yen, reacting to the combined effect of a robust US currency and higher Treasury yields, which amplified demand for the greenback across major currency markets.

BoJ Meeting Provides Limited Yen Support

Despite the downward pressure, the yen found some relief from the Bank of Japan’s December 19 meeting. Minutes indicated that some policymakers believe Japan’s real interest rates remain extremely low, signaling the potential for further rate hikes in the future. Markets interpreted these signals as supportive for the yen, limiting its losses even amid dollar strength.

Yen Navigates Competing Forces

Overall, the Japanese yen is currently balancing between two opposing forces: downward pressure from a strong dollar and rising US yields, and modest support from expectations of continued monetary tightening in Japan. This tug-of-war suggests that while the yen may remain under pressure in the near term, underlying support from the BoJ’s policy outlook could temper further declines.