Geopolitical tensions and Fed policy expectations lift the dollar, while Japanese FX interventions prove ineffective against yen weakness.
The USD/JPY pair rebounded toward key resistance levels as the US dollar regained strength amid persistent geopolitical risks and shifting Federal Reserve policy expectations. Reports of stalled war-ending negotiations between the US and Iran, along with potential escalation, kept risk sentiment elevated, supporting the greenback.
Recent Japanese FX interventions have failed to curb the yen’s slide, with sellers quickly re-entering the market. Meanwhile, resilient US economic data and elevated energy prices have led the Fed to reconsider its easing bias, reducing rate cut expectations. A potential reopening of the Strait could pressure oil prices and boost rate cut bets, but inflation risks may persist.
Market focus remains on Fed policy and economic data, with scenarios ranging from prolonged oil price spikes to a hawkish pivot, both of which could further support the dollar.