USD/JPY sides below 145.00 as Yen recovers from five-week low

The Japanese Yen (JPY) extends its winning streak against the US Dollar (USD) on Tuesday, building on Monday’s gains as the Greenback stays on the defensive. Easing geopolitical tensions after a ceasefire between Iran and Israel has curbed safe-haven demand for the US Dollar, allowing the Yen to gain further ground.

USD/JPY is trading below the 145.00 mark at the time of writing, during American trading hours, and staying afloat above its 100-day Moving Average, which remains a key near-term support zone.

The Japanese Yen is now easing away from the five-week low it touched on Monday, as improving risk sentiment and softer Oil prices help the currency regain lost ground. Lower energy costs are viewed as supportive for Japan’s trade balance, adding to the Yen’s strength. Meanwhile, Japan’s benchmark 10-year government bond yield rose past 1.42% for a second straight session, buoyed by stronger risk appetite and calming geopolitical tensions that have dampened demand for safe-haven bonds.

Last week’s data revealed that Japan’s core inflation accelerated for the third consecutive month in May, climbing to 3.7% — its highest level since January 2023. The stubborn inflation trend has strengthened market expectations that the Bank of Japan may stay on its tightening path. At its June policy meeting, the central bank kept its benchmark rate unchanged at 0.5% but indicated a readiness to hike further, citing persistent price pressure as companies pass higher wage costs onto consumers.

On the US side, the weakness in the US Dollar stems from a combination of easing geopolitical tensions and dovish signals from the Federal Reserve (Fed). President Trump’s announcement of a ceasefire between Iran and Israel, which he dubbed “The 12-Day War,” helped calm markets and reduce safe-haven flows into the Greenback. Meanwhile, recent remarks from Fed officials have bolstered expectations for a possible rate cut as early as July, further weighing on the US Dollar Index (DXY), which is drifting lower toward 98.00 on Tuesday.

Looking ahead, traders will keep a close watch on Fed Chair Jerome Powell’s ongoing testimony before Congress for any fresh clues on the policy outlook. While Powell’s prepared remarks reiterated that the Fed sees no urgency to cut rates, market participants will scrutinize his live responses for any subtle shifts in tone. Any hints on the timing of a potential rate cut could influence US Dollar sentiment and shape near-term moves in USD/JPY.