US-Iran Tensions Provide Floor for Dollar Amid Japan's Rising Inflation
The yen strengthened against the US dollar on Monday, following Japan's inflation data that accelerated for two consecutive months. The core CPI rose to 1.8% year-on-year in July, exceeding market expectations and reinforcing the prospect of a Bank of Japan rate hike in September.
Despite this, the USD/JPY pair declined slightly during the Asian session, trading near 158.90. However, Treasury Secretary Bessent hinted that the US Treasury's long-term debt buyback program could exceed $4 billion per tranche, continuing to weigh on the dollar and support the yen.
But geopolitical tensions between the US and Iran provided a safe-haven buying support for the US dollar, limiting its decline against the Japanese currency. The Iranian Foreign Minister described US sanctions as 'acts of desperation,' while an Iranian security official warned of 'earthquake-like' retaliation.