News Maker 23

USD/JPY strengthened for the second consecutive day in the Asian session on Tuesday (September 15th), supported by a still-strong US dollar. The pair traded above the mid-154.00s, although its upward momentum appears less solid.

Investors remain cautious ahead of the policy decisions of two major central banks this week. The Federal Reserve is scheduled to announce its interest rate decision on Wednesday, while the Bank of Japan will deliver its policy decision on Friday.

Expectations of a Fed rate hike remain a key support for the US dollar. The 10-year US Treasury yield, which briefly surpassed 5% for the first time since 2023, also strengthened the greenback's appeal.

In addition to yield factors, geopolitical tensions in the Middle East also maintained demand for the dollar as a safe-haven asset. The US-Iran standoff and the risk of a new escalation kept the US dollar near a nearly two-week high.

However, USD/JPY gains could be restrained by expectations of BoJ policy normalization. DBS analysts noted that speculative players began unloading short yen positions following the joint US-Japan intervention in July and shifting expectations toward tighter BoJ policy.

Expectations for a BoJ interest rate hike have strengthened after some previously skeptical of tightening began to acknowledge the need for higher rates. This has provided support for the yen and could limit further weakness against the US dollar.

Newsmaker Analysis: USD/JPY is currently in a tug-of-war between a strong US dollar and a yen that is starting to gain support from hawkish BoJ expectations. If the Fed raises interest rates and signals a hawkish stance, USD/JPY has a chance to hold firm above 154. However, if the BoJ also signals an aggressive rate hike, the pair's gains could be limited, and the yen could potentially strengthen again. (asd)