Soft US inflation data reduces July Fed hike bets, but geopolitical risks cap dollar losses against the yen.
USD/JPY remains near cycle highs around 162.85 as traders reassess Fed policy after weaker-than-expected US inflation data. Markets now see a July rate hike as unlikely, with October the earliest possibility and December fully priced in. However, escalating US-Iran tensions and potential oil supply disruptions keep inflation risks elevated, limiting dollar downside.
Japanese officials have warned of stealth interventions to curb yen weakness, slowing its depreciation. Yet, prolonged geopolitical risks could push the yen to new lows. The pair’s bullish tilt persists, with sellers eyeing a pullback to 160.50 if resistance holds.
The Fed’s dovish shift contrasts with persistent inflation concerns, leaving USD/JPY in a tight range as markets weigh policy and geopolitical developments.