Japanese Yen Gains Slightly Against Weaker USD but Lacks Bullish Momentum

Japanese Yen Finds Modest Support Against Weakening USD, But BoJ Uncertainty Caps Gains

JPY edges higher amid weaker USD
The Japanese Yen (JPY) traded slightly stronger on Wednesday, recovering earlier Asian session losses against a broadly softer US Dollar (USD). The move marks the second day of mild gains for the JPY as expectations grow for a Federal Reserve interest rate cut in September, which continues to put pressure on the Greenback.

Fed-BoJ divergence remains key driver
While the USD is facing downward pressure from growing Fed rate cut bets — now priced at a 94% probability for September — the Japanese Yen’s upside remains limited. Divergent central bank policies between the Federal Reserve and the Bank of Japan (BoJ) are influencing market direction. Although markets expect the BoJ to hike rates sometime this year, the lack of clarity on timing is restraining bullish momentum in the JPY.

Soft Japanese inflation and domestic uncertainty
Data released earlier in the day showed that Japan’s wholesale inflation slowed for the fourth straight month in July, further clouding the BoJ's policy outlook. Coupled with rising political uncertainty at home and fears over economic fallout from renewed US tariffs, investors are tempering their expectations for imminent tightening by the BoJ.

Risk-on sentiment weighs on safe-haven demand
The JPY’s traditional role as a safe-haven currency has also been muted amid a broader risk-on mood. Optimism over continued US-China trade ceasefire and hopes for progress in the upcoming US-Russia summit in Alaska — aimed at de-escalating the Ukraine war — has lifted market sentiment, further capping safe-haven demand for the Yen.

Outlook
While the Japanese Yen may benefit from sustained USD softness driven by Fed policy shifts, its own upside remains uncertain without stronger conviction from the BoJ. Traders will look to upcoming central bank commentary and global risk sentiment for clearer direction in the JPY/USD pair.Japanese Yen Finds Modest Support Against Weakening USD, But BoJ Uncertainty Caps Gains

JPY edges higher amid weaker USD
The Japanese Yen (JPY) traded slightly stronger on Wednesday, recovering earlier Asian session losses against a broadly softer US Dollar (USD). The move marks the second day of mild gains for the JPY as expectations grow for a Federal Reserve interest rate cut in September, which continues to put pressure on the Greenback.

Fed-BoJ divergence remains key driver
While the USD is facing downward pressure from growing Fed rate cut bets — now priced at a 94% probability for September — the Japanese Yen’s upside remains limited. Divergent central bank policies between the Federal Reserve and the Bank of Japan (BoJ) are influencing market direction. Although markets expect the BoJ to hike rates sometime this year, the lack of clarity on timing is restraining bullish momentum in the JPY.

Soft Japanese inflation and domestic uncertainty
Data released earlier in the day showed that Japan’s wholesale inflation slowed for the fourth straight month in July, further clouding the BoJ's policy outlook. Coupled with rising political uncertainty at home and fears over economic fallout from renewed US tariffs, investors are tempering their expectations for imminent tightening by the BoJ.

Risk-on sentiment weighs on safe-haven demand
The JPY’s traditional role as a safe-haven currency has also been muted amid a broader risk-on mood. Optimism over continued US-China trade ceasefire and hopes for progress in the upcoming US-Russia summit in Alaska — aimed at de-escalating the Ukraine war — has lifted market sentiment, further capping safe-haven demand for the Yen.

Outlook
While the Japanese Yen may benefit from sustained USD softness driven by Fed policy shifts, its own upside remains uncertain without stronger conviction from the BoJ. Traders will look to upcoming central bank commentary and global risk sentiment for clearer direction in the JPY/USD pair.