USD/JPY Retreats from 160.00 as Investors Reassess Fed Rate Hike Bets

The USD/JPY pair has retreated from its recent highs above 160.00 to the 159.50 area, as investors reassess their expectations for a potential Fed rate hike in September.

The US Dollar's gains were trimmed on Monday, after Federal Reserve Chairman Kevin Warsh struck an unexpectedly hawkish tone at the Jackson Hole meeting, suggesting that policymakers have 'work to do' to bring inflation to the 2% target.

However, markets are now questioning this view, and investors are looking to US payrolls data due next Friday and next week's inflation data for confirmation of a rate hike.

Rising hopes of BoJ tightening have provided some support to the Japanese Yen, but the wide gap between BoJ interest rates and those of most major central banks continues to limit the Yen's gains.