The USD/JPY pair saw slight increases around 161.80 during the Asian session on Monday, largely due to ongoing uncertainty stemming from US-Iran discussions. However, there’s a possibility that gains could be capped by worries about potential interventions from Japanese officials. Traders are closely watching the upcoming U.S. nonfarm payrolls (NFP) report set to come out later this Thursday.
Officials from the Trump administration indicated on Monday that both the U.S. and Iran would “stand by for now” after recent exchanges of gunfire near the Strait of Hormuz. A U.S. official confirmed that ships can navigate freely in the strait, noting that the tentative agreement hasn’t yet impacted navigation in the area. A meeting between the two nations is slated for Tuesday in Qatar, as reported by Axios.
Market sentiment is supporting the Japanese yen (JPY), though there’s increased vigilance against possible currency interventions that could pose a challenge for the yen. Japan’s Chief Cabinet Secretary Minoru Kihara mentioned last week that appropriate steps would be taken regarding currency movements if necessary.
Naoki Tamura, a board member at the Bank of Japan, expressed a somewhat hawkish view last week, suggesting that the BOJ should be ready to raise interest rates periodically and accelerate the pace of hikes, particularly in light of inflation risks linked to the Middle Eastern conflicts.
The Bank of Japan is set to hold its next monetary policy meeting on July 30-31, where it is widely anticipated that interest rates will remain unchanged. However, there will be updates on the quarterly forecasts, and the market will analyze signals related to the timing of future rate hikes. A recent Reuters poll suggested that many economists expect a rate increase to reach 1.25% in the fourth quarter.
