Weakened Dollar Gives Yen Room to Recover Amid Slowing US Economy

The US dollar's weakening has given the yen room to recover, according to LiteFinance. The Japanese economy has continued to grow for three consecutive quarters, while the US economy is slowing down. Employment and retail sales are weakening in the US, and inflation has declined.

The Bank of Japan could afford to tighten monetary policy more aggressively, potentially raising borrowing costs to 2.25-2.5% while inflation remains around 2%. Real interest rates are still negative, unlike in most other developed economies.

Hedge funds have halved their net short positions in the yen since the coordinated intervention in the Forex market. A sustained break above the 159.5 resistance level would offer a buy signal for the USD/JPY pair.