Fundamental factors favor further upside for the pair amid Japan’s fiscal concerns and low interest rates supporting carry trades.
The USD/JPY pair traded in a tight range near 159.00 during Tuesday’s Asian session, lacking a clear catalyst for a directional move. The Japanese Yen remains under pressure due to Japan’s worsening fiscal outlook, including rising long-term interest rates and a heavy national debt burden.
Japan’s interest rates remain significantly below those of other major economies, sustaining demand for the JPY carry trade. This dynamic has offset the impact of a late-July US-Japan currency intervention, keeping the pair’s upward bias intact.
Geopolitical risks, including US sanctions on Iran and potential disruptions to oil exports, continue to support the USD. Inflation concerns tied to volatile oil prices may further bolster the dollar’s strength.