Ella 
USD/JPY recovered from the previous session’s losses to trade higher around 149.00 during the European session on Tuesday. The pair rebounded on the strength of the US dollar (USD).
Positive risk sentiment in the Middle East conflict could weigh on the safe-haven Japanese yen (JPY), becoming an important factor supporting the USD/JPY pair.
Earlier on Saturday, Hamas launched an offensive against Israel using its army, navy and air force. Israeli forces retaliated with a powerful counterattack in Gaza, marking the region’s most intense military conflict to date.
The Bank of Japan is considering raising its core consumer price index (CPI) forecast for the 2023/24 fiscal year (FY) to about 3%, compared with the 2.5% forecast in July, Kyodo News reported on Tuesday.
Japan’s non-seasonally adjusted current account fell to 2,279.7 billion yen in August, compared with expectations of 3,090.9 billion yen and the previous value of 2,771.7 billion yen. There are only minor data releases on Japan’s economic calendar for the rest of the week.
Japanese Finance Minister Shuni Suzuki said on Tuesday that “the current weakness of the yen is partly due to interest rate differences.” Suzuki also mentioned that Japan will take the lead in convening a meeting of finance ministers and central bank governors of the Group of Seven (G7) advanced countries on October 12 to discuss the Ukrainian war and world economic issues.
At press time, the U.S. Dollar Index (DXY) was bidding around 106.00. However, the dollar failed to appreciate the strength in U.S. non-farm payrolls data released on Friday.
In addition, the decline in U.S. Treasury yields on Monday also contributed to the depreciation of the U.S. dollar (USD). As of press time, the 10-year U.S. Treasury yield was 4.67%.
In addition, comments from Federal Reserve (Fed) officials overnight led investors to downplay the possibility of additional interest rate hikes, prompting U.S. bond yields to fall further. Therefore, this development is seen as weakening the dollar’s strength.
Dallas Fed President Lori Logan said the need to raise the Fed’s funds rate may lessen, while Fed Vice Chairman Philip Jefferson acknowledged the central bank must proceed with caution when raising policy rates further.
Investors’ focus on economic data this week will be inflation numbers, with the Producer Price Index (PPI) due on Wednesday and the FOMC minutes and Consumer Price Index (CPI) on Thursday.
