USD/JPY Trapped in Range as Japan Prepares for Rate Hike
The USD/JPY currency pair has been stuck in a narrow trading range for over a week, hovering around 159.53.
Despite recent efforts by Tokyo and Washington to prop up the yen, it has lost roughly half of its gains since their joint intervention at the end of July.
The Japanese currency continues to face significant headwinds, including a wide interest rate differential, rising fiscal risks, and elevated energy and import costs.
However, markets are increasingly pricing in a Bank of Japan rate hike in September as a way to support the yen and combat inflation.
A recent surge in 10-year Japanese government bond yields to 30-year highs reflects these expectations, while stronger-than-expected core machinery orders rose 9.7% in June, further supporting the case for tighter policy.