Yen Recovers Amid BoJ Rate Hike Speculation

(RTTNews) - The Japanese yen recovered from early lows against other major currencies in the European session on Tuesday, as traders speculate that the Bank of Japan (BoJ) will hike interest rates this year.

In a speech today at the parliament, the Bank of Japan Governor Kazuo Ueda said the central bank will continue to raise interest rates, if it becomes more convinced that underlying inflation will reach its 2 percent target.

"Once we have more conviction that underlying inflation will approach 2 percent or hover around that level, we will continue to raise interest rates to adjust the degree of monetary support," Ueda said.

In economic news, data from the Japan Machine Tool Builders Association, or JMTBA, showed that Japan's machine tool orders increased for the eighth straight month in May, though at a slower pace amid weaker domestic demand.

Machine tool orders climbed 3.4 percent year-on-year in May, after rising 7.7 percent in the previous month. Foreign orders grew 6.7 percent from last year, while domestic demand was down by 5.2 percent.

On a monthly basis, machine tool orders fell 11.2 percent, following a 13.8 percent plunge in April.

Meanwhile, the European shares traded higher as the U.S.-China trade talks continue for a second day in London to defuse tensions over chip exports and critical minerals.

There was no significant breakthrough after the first day of negotiations, but U.S. President Donald Trump told reporters at the White House that the talks were "going well" and that he was "only getting good reports".

U.S. Treasury Secretary Scott Bessent told reporters the meeting was "good" while Commerce Secretary Howard Lutnick called the discussions "fruitful."

In the European trading today, the yen rose to a 4-day high of 194.78 against the pound, from an early near 4-week low of 196.45. The yen may test resistance around the 192.00 region.

Against the euro and the U.S. dollar, the yen advanced to 164.63 and 144.40 from an early more than 7-month low of 165.45 and nearly a 2-week low of 145.29, respectively. On the upside, 157.00 against the euro and 141.00 against the greenback are seen as the next resistance levels for the yen.

The yen climbed to 175.78 against the Swiss franc, from an early low of 176.30. The next possible upside target for the yen is seen around the 172.00 region.

Moving away from an early near 4-week low of 94.60 against the Australian dollar, the yen advanced to a 4-day high of 93.90. The yen may test resistance around the 90.00 region.

Against the New Zealand and the Canadian dollars, the yen advanced to 87.21 and 105.33 from an early near 1-month low of 87.73 and a 4-day low of 105.95, respectively. If the yen extends its uptrend, it is likely to find resistance around 85.00 against the kiwi and 103.00 against the loonie.

Looking ahead, U.S. NFIB Small Business Optimism for May and U.S. Redbook report are slated for release in the New York session.