Japanese Yen stays on the back foot near 159.00 vs broadly rebounding USD
The USD/JPY pair edges higher during the Asian session on Tuesday, with bulls awaiting a sustained strength and acceptance above the 159.00 mark before positioning for further gains. Nevertheless, spot prices remain close to a three-week high, touched last Thursday, and draw support from a combination of factors.
Developments over the weekend fueled hopes for a potential US-Iran deal to end a nearly three-month-long war, though the optimism remains capped amid major disagreements over Tehran's nuclear program and the Strait of Hormuz. Adding to this, Fox News reported that US forces conducted "self-defense strikes" in southern Iran on Monday. This, in turn, helps the safe-haven US Dollar (USD) to reverse a part of the previous day's fall to an over one-week trough and acts as a tailwind for the USD/JPY pair.
Furthermore, hawkish US Federal Reserve (Fed) expectations, bolstered by sticky inflation and a resilient economy, turn out to be another factor benefiting the Greenback. The Japanese Yen (JPY), on the other hand, is undermined by concerns that Japan's economy will come under substantial strains due to continued disruptions to energy supplies from the Middle East. This offers additional support to the USD/JPY pair and backs the case for an extension of the move up from the 155.00 psychological mark, or the monthly low.
However, speculations that Japanese authorities will step in again to prop up the domestic currency might hold back bullish traders from placing aggressive bets on the currency pair. Moving ahead, Tuesday's release of the Conference Board's US Consumer Confidence Index could provide some impetus to the USD/JPY pair later during the North American session. The focus, however, will remain glued to developments surrounding the Middle East crisis, which might continue to infuse volatility in the financial markets.
Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
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