The Japanese Yen strengthens on US-Iran deal hopes and expectations of a Bank of Japan rate increase to a 31-year high.
The USD/JPY pair dropped to around 160.15 in Asian trading on Tuesday as the Japanese Yen (JPY) advanced against the US Dollar (USD). The move follows a US-Iran agreement to reopen the Strait of Hormuz, easing energy supply concerns and supporting the JPY.
Markets are focused on the Bank of Japan’s (BoJ) interest rate decision later today, with expectations of a hike to a 31-year high. The BoJ aims to address inflationary pressures stemming from energy shocks linked to geopolitical tensions. Deputy Governor Ryozo Himino will chair the meeting due to Governor Kazuo Ueda’s hospitalization.
The US-Iran deal, which includes a 60-day nuclear negotiation period, has provided additional support to the JPY. The BoJ’s potential rate hike would mark another step in its monetary policy normalization.