Japanese Yen Recovers from Multi-Month Lows, but USD/JPY Upside Remains Intact

Japanese Yen Recovers from Multi-Month Lows, but USD/JPY Upside Remains Intact

The Japanese Yen (JPY) staged a modest rebound on Wednesday from its lowest level against the US Dollar (USD) since April, buoyed by safe-haven flows amid renewed trade tensions and risk-off sentiment. However, the recovery appears limited as broader market dynamics continue to favor the USD/JPY pair, which trades near the 149.00 level.

Safe-Haven Demand Supports the Yen—For Now

Investors showed a mild preference for safe-haven assets like the Yen, as global uncertainty surrounding Trump-era tariffs and US inflation continue to rattle markets. The soft tone in equities helped the JPY pare back some of its earlier losses.

USD/JPY slipped below 149.00 intraday, but the pullback lacked strong follow-through.

BoJ Policy Inertia and Domestic Politics Limit JPY Strength

Despite the JPY rebound, expectations that the Bank of Japan (BoJ) will avoid tightening this year remain strong. Rising economic costs from US trade tariffs have pushed Japanese policymakers into a wait-and-see stance.

Further compounding the situation is political uncertainty ahead of Japan’s House of Councillors election on July 20, making market participants cautious about initiating fresh long positions in JPY.

Fed Policy Outlook Keeps USD Firm

While the Dollar slipped slightly on Wednesday, the broader bullish bias remains, backed by hawkish Fed expectations. Following stronger-than-expected June CPI data, traders have scaled back any imminent rate cut speculation.

Market Insight:
“The Fed’s stance remains crucial to USD/JPY direction, and as long as rate cuts are off the table, dip-buying in USD/JPY is likely.”

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