Japanese Yen remains on the front foot as Middle East tensions rise
The Japanese Yen (JPY) advances to over a one-week high against its American counterpart during the Asian session on Friday and draws support from a combination of factors.
A further escalation of geopolitical tensions in the Middle East weighs on investors' sentiment and boosts demand for traditional safe-haven assets, including the JPY.
Apart from this, the growing acceptance that the Bank of Japan (BoJ) will stick to the path towards monetary-policy normalization turns out to be another factor that contributes to the JPY's relative outperformance.
However, a modest US Dollar (USD) bounce from its lowest level since March 2022 assists the USD/JPY pair pare its heavy intraday losses to the 142.80-142.75 region.
Any meaningful USD appreciation, however, seems elusive as signs of cooling inflation and a potential weakening in the labor market lifted bets for an imminent interest rate cut by the Federal Reserve (Fed) in September.
This marks a significant divergence from hawkish BoJ expectations, which should continue to benefit the lower-yielding JPY and cap any recovery attempt from the USD/JPY pair.
Source: FXStreet
