Anna 
The Japanese Yen (JPY) faced challenges in capitalizing on a modest intraday uptick against the US Dollar (USD) as it hovered near a multi-decade low heading into the European session on Tuesday. The Bank of Japan (BoJ) signaled a cautious approach to policy normalization, contrasting with expectations of the Federal Reserve (Fed) keeping interest rates higher for an extended period amid persistent inflationary pressures. Consequently, the significant interest rate differential between the US and Japan is expected to persist, hindering the safe-haven appeal of the JPY amid a generally positive risk sentiment.
Conversely, the USD maintained its strength, remaining within striking distance of its highest level since November, bolstered by expectations of a hawkish Fed stance. This dynamic provided further support to the USD/JPY pair. However, speculation that Japanese authorities may intervene to support the domestic currency could limit the pair’s upside potential. Traders also exhibited caution ahead of the crucial BoJ decision scheduled for Friday, with market participants awaiting insights into the central bank’s policy direction.
Additionally, the near-term trajectory of the USD/JPY pair will be influenced by key economic indicators, including the Advance US Q1 GDP print and the US Personal Consumption Expenditures (PCE) Price Index. These data releases will provide valuable insights into the economic landscape and may impact market expectations regarding monetary policy, thus shaping the direction of the currency pair in the short term.
