USD/JPY makes a strong recovery to close to 147.70 as the Japanese Yen weakens.

• USD/JPY rises as Japanese yen depreciates despite BOJ’s hawkish stance
• Minutes from the BOJ’s July meeting indicate a strong likelihood of tightening monetary policy by the year’s end.
• There’s a high probability that the Fed will lower interest rates next month.

During Tuesday’s European trading session, the USD/JPY pair grew by 0.35% to reach 147.70. It found momentum after hitting a 10-day low of approximately 146.60 early in the day, drawing significant buying interest.

The Japanese yen’s weakness has played a crucial role in this rebound. Even with the BOJ’s meeting minutes from June implying confidence in raising interest rates later this year, the yen continues to trade poorly.

BOJ officials are leaning toward further tightening as they navigate the uncertainties surrounding tariffs introduced by US President Trump.

Also contributing to the USD/JPY’s upward movement is the recovery of the US dollar. The US Dollar Index (DXY), which measures the dollar’s performance against six major currencies, is hovering near 99.00, bouncing back from a weekly low of 98.60.

Yet, there remains some uncertainty regarding the dollar’s trajectory, as traders start to brace for a likely interest rate cut during September’s policy meeting.

The CME FedWatch tool indicates a 92.2% chance that the Fed will reduce interest rates next month, prompted by a slowdown in labor demand as indicated by the July Non-Farm Payroll report.