Anna 
During the early European session on Tuesday, the Japanese Yen (JPY) has displayed a slight positive bias against the US Dollar (USD). However, this upward momentum lacks follow-through and is situated near the year-to-date low recorded the previous day. The stability in equity markets, attributed to reports of increased buying by a Chinese sovereign fund, has limited the gains for the safe-haven JPY.
Despite a modest profit-taking slide in the USD from its nearly three-month peak, the decline remains shallow. The market sentiment increasingly accepts that the Federal Reserve (Fed) is likely to maintain higher interest rates for an extended period due to the resilient US economy. This sentiment serves as a supportive factor for the USD/JPY pair.
On the other hand, the Bank of Japan’s (BoJ) recent hawkish stance, signaling determination to achieve its inflation goal and preparing to lift interest rates from negative territory in March or April, provides support for the JPY. Additionally, concerns about geopolitical tensions in the Middle East and China’s economic slowdown act as factors limiting losses for the JPY and preventing significant appreciation in the USD/JPY pair.
Traders are advised to exercise caution in making aggressive directional bets, especially in the absence of significant economic releases from the US. Speeches by influential Federal Open Market Committee (FOMC) members could introduce volatility and offer new momentum to the USD/JPY pair.
