USD/JPY Retreats from One-Month High Amid Interest Rate Hike Bets

The USD/JPY pair has retreated from its one-month high at 160.20 but the downward pressure seems limited, according to technical analysis.

A modest US dollar downtick is seen as a key factor contributing to the decline, driven by rising bets for faster interest rate hikes by the Bank of Japan (BoJ).

However, expectations that the US Federal Reserve (Fed) will raise borrowing costs next month, along with escalating US-Iran tensions, may prevent aggressive bearish bets.

The wide US-Japan interest rate gap and concerns about Japan's worsening fiscal condition are expected to keep a lid on any meaningful appreciation for the Japanese Yen (JPY), thereby limiting losses for the USD/JPY pair.