Ella 
USD/JPY is trading higher for the second day in a row, supported by a variety of factors.
The Bank of Japan’s dovish stance and positive risk sentiment continued to weaken the yen’s risk aversion.
Bets on more rate hikes by the Fed acted as a “tailwind” for the dollar and continued to support the greenback.
USD/JPY gained some positive momentum for the second day in a row on Tuesday, building on a solid recovery from a one-week low of 141.00 the previous day. USD/JPY climbed to around 143.00 in Asia and found support from a variety of factors.
A more dovish stance from the Bank of Japan (BoJ) and a sharp rebound in U.S. stocks overnight were seen weighing on risk aversion in the Japanese Yen (JPY) and acting as a “tailwind” for USD/JPY. It is worth recalling that the Bank of Japan’s “Summary of Opinions” released on Monday showed policymakers’ support for the need to patiently continue the current monetary easing in order to achieve the price stability objective. Separately, Federal Reserve (Fed) officials said further rate hikes are likely as inflation remains stubbornly high and the labor market remains tight.
It came after the closely watched U.S. monthly jobs report on Friday showed continued tightness in the labor market and raised hopes of a soft landing for the economy. That could leave the Fed sticking to its hawkish stance and leaving the door open for a 25 basis point hike in September or November. That outlook still supports higher U.S. Treasury yields and provides some support to the U.S. dollar (USD), which is seen as another factor driving USD/JPY. Dollar bulls, however, appear reluctant to place aggressive bets ahead of the release of U.S. consumer inflation data on Thursday.
All-important U.S. inflation will play a key role in shaping market expectations for the Fed’s future rate hike path, which in turn will fuel demand for the dollar and help determine the next move for USD/JPY. Meanwhile, Japan released better-than-expected current account data, but that did little to ease selling pressure on the yen. This in turn suggests that USD/JPY has the least resistance to the upside, supporting the prospect of a retest of the monthly top near 143.85-143.90 touched last Thursday.
