Japanese Yen gains on safe-haven demand despite US Dollar’s yield advantage

A sharp retreat in the US Dollar (USD) has favoured the Japanese Yen (JPY). Falling US Treasury yields and a surge in geopolitical risk aversion drove strong safe-haven demand for the Yen, sending USD/JPY down from the 158.20 area to intraday lows near 156.08. Despite retaining a broad yield advantage across most major currency pairs, the US Dollar faces resistance against the JPY from stronger Japanese inflation readings and robust private sector growth. For institutional strategists at UOB and BBH, the question is whether this steep, oversold sell-off is a tactical correction within the wider 155.00–160.00 trading range or signals the beginning of a deeper structural unwinding.

156.00 and 155.50 in Focus as UOB Flags USD/JPY Downside Momentum

A sudden build-up in USD/JPY selling pressure is the focus for Quek Ser Leang and Lee Sue Ann at UOB. The pair broke below its recent 157.70–158.80 consolidation band, reaching 156.67. Despite deeply oversold short-term technical readings, the strategists anticipate further losses towards 156.00 before the pair stabilises. They have also lowered strong resistance to 157.30.

"In a sudden sharp move, USD plunged to a low of 156.67. The rapid increase in downward momentum suggests USD is likely to decline further. Support levels are 156.00 and 155.50. On the upside, a break above 157.80 would mean that USD is not declining further... While deeply oversold, the decline could extend to 156.00 before stabilisation can be expected."

155.00–160.00: BBH Sees JPY Safe-Haven Inflows Keeping USD/JPY Range-Bound

Safe-haven buying amid market volatility has put the Japanese Yen at the forefront of global currency gains, according to Elias Haddad at Brown Brothers Harriman (BBH). Stronger Japanese inflation readings, including 2.4% core CPI, and resilient PMI data at 52.3 support the longer-term case for BoJ rate increases. However, markets assign only 2% odds to an October rate move. Unless risk aversion intensifies, USD/JPY should therefore remain within 155.00–160.00.

"JPY leads gains, underscoring its status as the ultimate refuge currency. Japan September CPI and October PMI back additional BOJ hikes... Nonetheless, the BOJ is unlikely to crank up the pace of tightening with headline and core CPI inflation tracking below its 2026 projection of 2.5%. The swaps curve price in just 2% odds of a 25bps BOJ rate hike to 1.50% on October 30, and 80% probability of a hike on December 18... That leaves USD/JPY likely to trade within a 155.00-160.00 range in the near term."

USD/JPY: Main Implications

Lower US Treasury yields and abrupt increases in safe-haven demand for the JPY remain vulnerabilities for the US Dollar, despite its broader macroeconomic dominance. The steep USD/JPY slide towards 156.08 illustrates that exposure. According to UOB, technical momentum could extend the pair’s near-term losses towards 156.00 and 155.50. By contrast, BBH argues that firm structural support should emerge within the wider trading band as expectations for Bank of Japan tightening have largely shifted to December, with an 80% probability. That broader range remains 155.00–160.00.

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Find out more.)