Ella 
In the Asian market on Tuesday, the yen rose, recovering some of the losses of the past two days, and the yen fell to the annual low hit the previous day against the US dollar. Amid geopolitical risks, bets that the Federal Reserve may not cut interest rates as sharply as expected have reduced the market’s appetite for riskier assets. In addition, the Bank of Japan’s maintenance of hawkish bias is also boosting the yen, indicating that the Bank of Japan is confident in achieving its inflation target and is ready to move away from negative interest rate policy at its upcoming meeting in March or April. This has in turn weighed on USD/JPY, even as the USD/JPY downside appears to be easing even amid bullish USD sentiment.
In fact, the U.S. dollar index, which tracks the greenback against a basket of currencies, is near its highest level since Nov. 14 as investors continue to scale back expectations for aggressive easing from the Federal Reserve in 2024. Newly released U.S. macro data showed the economy was in good shape, giving the Federal Reserve more room to maintain higher interest rates for a longer period. In addition, comments from several influential Federal Reserve officials, including Federal Reserve Chairman Powell, reaffirmed the hawkish outlook, which still supported the rise in U.S. Treasury yields and continued to support the dollar. In addition, the recent widening of the interest rate differential between the United States and Japan may continue to suppress Japanese yen buying, and will also limit the apparent decline of USD/JPY.
