Invesco CurrencyShares Japanese Yen Trust (FXY)

Question: Can you speak to the Yen vs the Dollar as Japan raises rates? Could you look at FXY? Thanks.

Markets are pricing in and widely expecting the Bank of Japan (BOJ) to hike interest rates at its policy meeting concluding on Friday, December 19, 2025.

In theory, the Japanese Yen should strengthen on a BOJ rate hike, as higher policy rates lift yields on yen-denominated assets and help narrow the interest-rate differential versus the U.S. and other higher-yielding currencies, reducing the appeal of yen-funded carry trades.

In practice, the market response depends on expectations and the broader macro backdrop. A fully anticipated hike, which appears to be the case for this week's BOJ meeting, may generate little follow-through for the Yen.

The bottom line is that BOJ rate hikes are structurally bullish for the Yen, but the size and durability of any move hinge on expectations, policy guidance, and the global rate and risk environment.

That said, the Invesco CurrencyShares Japanese Yen Trust (FXY) sets up bearishly with a breakdown from a late 2023 into late 2025 triangle pattern firmly intact while below 60-61. This bearish setup suggests risk toward 51.50. The larger downtrend from late 2011 projects a 100% extension target (aka measured move) at 43.72. If FXY rallies back into its 2023-2025 triangle, the pattern highs at 65.64 to 66.12 offer a bigger resistance.

Chart 1: Invesco CurrencyShares Japanese Yen Trust (FXY): Monthly