On Monday, February 10, the USD/JPY pair was in focus, with current account figures pressuring the Japanese Yen. The current account surplus fell sharply from ¥3,352.5 billion in November to ¥1,077.3 billion in December.
Notably, the USD/JPY advanced after the data release, rising from 151.744 to 151.866.
Traders consider current account trends a leading economic indicator, reflecting Japan’s trade terms. A narrowing current account surplus suggests weaker trade terms, where Japan imports more than it exports, leading to an overall reduction in Japanese Yen demand relative to the US dollar.
Typically, a narrowing in the surplus may challenge the Bank of Japan’s plans to hike rates further as it may reflect broader economic challenges.
Bank of Japan Governor Kazuo Ueda and Deputy Governor Himino recently signaled the possibility of another rate hike if the economy and prices align with the BoJ’s projections. While traders consider the current account a barometer of economic health, recent wage growth data still supports the case for further rate hikes. However, uncertainty surrounding US tariffs could pose risks.
Financial news outlet The Kobeissi Letter reported that US President Trump plans reciprocal tariffs, potentially escalating the US-China trade war and impacting global trade flows.
