Japanese Yen Pulls Back from Two-Week High as USD Recovers, Bullish Bias Intact

Japanese Yen Retreats from Two-Week High as USD Recovers Slightly

The Japanese Yen (JPY) edged lower from its recent two-week high on Thursday, allowing the USD/JPY pair to recover slightly to trade near 145.85. The pullback in JPY strength comes amid a mild US Dollar rebound and weaker-than-expected Japanese economic data.

Domestic Political Risks and Soft PMI Weigh on JPY

While the US-Japan trade deal has helped ease concerns over economic risks from tariffs, Japan’s flash Manufacturing PMI disappointed markets, reinforcing concerns over domestic growth. Adding to JPY pressure is ongoing political uncertainty in Japan, which has tempered safe-haven flows.

Despite this, the JPY retains a bullish undertone due to market expectations of a possible interest rate hike by the Bank of Japan (BoJ) later this year — a view reinforced by improving trade stability and firm inflation expectations.

USD Recovery Remains Limited

The US Dollar (USD) has rebounded modestly from a multi-week low, helping USD/JPY stabilize. However, investor caution persists due to concerns over the Federal Reserve’s independence, as US political interference in monetary policy continues to weigh on USD sentiment.

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