Market Highlight 26.12.2025

In 2025, the Japanese Yen appreciated only marginally - by less than 1% against the USD - after four consecutive years of depreciation, as expectations regarding policy rate hikes by the Bank of Japan (BoJ) and the interest-rate easing trajectory of the US Federal Reserve remained unclear. The Yen briefly strengthened beyond the 140 JPY/USD level in April before losing momentum amid uncertainty surrounding US President Donald Trump’s tariff policies and rising financial risks linked to political volatility in Japan. The exchange rate is currently trading around 155,70, not far from this year’s weakest level of 158,87 recorded in January. JPMorgan Chase, BNP Paribas, and several other financial institutions have forecast that the JPY could continue to weaken to around 160 per USD or lower by the end of 2026, as the yield differential between the United States and Japan remains wide, real interest rates stay negative, and capital outflows persist. The Yen’s depreciation trend is likely to continue as long as the BoJ maintains its current slow pace of monetary tightening and fiscal-policy-driven inflation risks remain in place.

On Tuesday evening, US President Donald Trump said he expects the FED Chair to cut interest rates despite the economy performing well. This marks the latest signal that the President is keen to appoint a successor to Chair Jerome Powell who would commit to lowering borrowing costs, as he prepares to announce the replacement. “Anyone who disagrees with me on this will never become Chair of the Federal Reserve!” he said.

The USD/VND exchange rate opened yesterday by falling rapidly below the key support level of 26.300, sliding to 26.270 by early afternoon. Stronger demand for the Vietnamese dong on the interbank market continued to underpin the downward adjustment in the exchange rate. The market may continue to move toward the next target range around 26.200.

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