## The Japanese Yen Exchange Rate Rises to Recent Highs on Federal Reserve Rate Hike Expectations

**Diverging Central Bank Policies Boost Yen as a Safe-Haven Asset**

Bank of Japan Governor Ueda Kazuo's latest comments on Monday set the tone for a strengthening yen. He reiterated that if inflation and economic data proceed as expected, the BOJ will continue to raise interest rates. This statement further reinforced market expectations of a rate hike cycle starting in December or January, directly pushing the two-year Japanese government bond yield to its highest level since June 2008 (breaking the 1% threshold). The 20-year yield also hit a new high since November 2020, with the narrowing interest rate differential between Japan and major global economies providing solid support for the yen bulls.

Meanwhile, the Federal Reserve's policy stance appears to be easing. Several Fed officials' recent statements have strengthened market expectations of a rate cut in December, which has directly pushed the US dollar index to its lowest in nearly two weeks, increasing downward pressure on USD/JPY. The opposing monetary policy directions of the two major central banks are the core drivers behind the current yen appreciation.

**Weakening Risk Sentiment Enhances Yen’s Safe-Haven Appeal**

The relatively weak performance of Asian stock markets during the trading session has added to the yen’s traditional safe-haven appeal. Amid risk aversion, investors are shifting funds into the low-yielding yen for safety. Combined with the overall dollar selling pressure, USD/JPY has risen to the 155.50-155.45 range, creating a new high in nearly a week and a half. Japanese Prime Minister Sanae Takaichi’s reaffirmation of fiscal discipline, along with Japan’s Q3 capital expenditure growth slowing but still positive at 2.9% year-over-year, further consolidates market bullishness on the yen.

Notably, Japan’s November composite PMI final reading held at 52.0, slightly up from 51.5, indicating that despite five consecutive months of manufacturing contraction, the continued expansion of the services sector has kept the private sector growth moderate. This structural divergence provides fundamental support for the yen’s resilience.

**Technical Outlook: 155.40-155.35 as the Key Support/Resistance Zone**

On the four-hour chart, the 155.40-155.35 area aligns with the 100-period simple moving average (SMA), serving as a critical convergence zone. Bearish momentum is building, and a confirmed break below this support would signal the continuation of the downtrend, with the next support at the 155.00 psychological level. If selling pressure persists, USD/JPY could further decline. Conversely, technical indicators on the daily chart remain in positive territory, but the oscillator on the four-hour timeframe has begun to show negative momentum, suggesting that bears may dominate in the medium term.

Any upward rebound must first find support before the 156.00 level. A break above this level with sustained strength could lead to a short-term correction toward the 156.65-156.70 range. Further breakthroughs might allow USD/JPY to retake the 157.00 mark, with momentum possibly extending toward the intermediate resistance at 157.45-157.50, ultimately approaching the multi-month high near 158.00 touched in November.

**Trading Focus: US ISM Manufacturing PMI and Key Economic Data**

At the start of this week, the release of the US ISM Manufacturing PMI will be a key focus during North American trading hours. Coupled with other important US macroeconomic data scheduled for early in the month, these figures are expected to play a crucial role in shaping the direction of the dollar and USD/JPY. Investors should closely monitor whether these economic indicators are sufficient to alter market perceptions of the Fed’s policy path, thereby influencing the subsequent performance of the Japanese yen exchange rate.