Ella 
The Japanese yen (JPY) broke a two-day losing streak on Monday. Traders are bracing for the Bank of Japan’s policy meeting next week, where a rate hike could be discussed to support the yen. Japanese Prime Minister Fumio Kishida said the central bank’s monetary policy normalization would help Japan’s transition to a growth-driven economy, Nikkei Asia reported.
Speculative short positions in the yen have risen to the second highest level on record, but have begun to decline after Japan’s suspected intervention to buy the yen surprised the market this month. As of Tuesday, market participants such as hedge funds held a total of 151,072 yen short contracts, according to data from the U.S. Commodity Futures Trading Commission. That marked a decrease of 30,961 contracts from the previous week and the biggest drop since May 7, when short positions fell by 33,466 contracts, according to a separate report from Nikkei Asia. Traders remain wary of the possibility of further intervention.
USD/JPY could limit its upside as the dollar faces challenges as bets on a September rate cut by the Federal Reserve increase and concerns about the fragility of the U.S. labor market persist. According to the CME Group’s Fedwatch Tool, the market currently shows a 91.7% probability of a 25 basis point rate cut by the Federal Reserve at its September meeting, up from 90.3% a week ago.
