USD/JPY Surges Near One-Month High Amid Japanese Fiscal Worries and Iran Tensions
The USD/JPY pair continues to trade near its one-month high of around 160.00, with the fundamental backdrop favoring bullish traders.
The Japanese Yen (JPY) has been underperforming due to market anxieties over Japan's public finances and expansionary fiscal policies.
US Treasury Secretary Scott Bessent stated that the recent JPY move is contained, but this has not alleviated hopes for another joint Japan-US intervention. Borrowing costs in Japan remain lower than in other major economies, including the US, keeping the so-called JPY carry trade active and supporting the USD/JPY pair.
The Bank of Japan (BoJ) increased its short-term policy rate to 1.00% in June, but financial markets are pricing in an 80% chance that the BoJ will narrow this difference with another rate hike in September. The Fed's benchmark rate ranges between 3.5% and 3.75%, leaving a rate gap of around 250-275 basis points.
Fresh US strikes on Iran have kept the geopolitical risk premium in play, supporting the safe-haven US Dollar (USD) and validating the positive outlook for the USD/JPY pair.