Japanese Yen strengthens as Trump’s tariff threats continue to drive some haven flows

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  • Concerns that US President-elect Donald Trump's tariffs would trigger trade wars, and impact the global economy, continue to drive some haven flows towards the Japanese Yen. 
  • Scott Bessent's nomination as the US Treasury secretary provided some respite to US bond investors and dragged the benchmark 10-year US Treasury yield to a two-week low on Monday.
  • Data released on Tuesday showed broadening service-sector inflation in Japan, keeping the door open for another rate hike by the Bank of Japan at its next policy meeting in December. 
  • Japanese Prime Minister Shigeru Ishiba said on Tuesday that he would ask companies to implement significant wage hikes at the annual "Shuntō" negotiations next spring.
  • The November FOMC meeting minutes revealed that the Committee could pause its easing of the policy rate and hold it at a restrictive level if inflation remained elevated.
  • Officials expressed confidence that inflation is easing and the labor market is strong, which should allow the Federal Reserve to cut rates further, albeit at a gradual pace.
  • According to the CME Group's FedWatch Tool, traders are currently pricing in a 63% chance that the Fed will lower borrowing costs by 25 basis points in December. 
  • The US Dollar struggles to gain any meaningful traction and languishes near the weekly low touched on Tuesday, exerting additional pressure on the USD/JPY pair. 


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