Japanese yen fall may be limited by safe flows amid Middle East tensions.

On Tuesday, the Japanese yen (JPY) extended its losses against the US dollar (USD). The safe-haven flows may restrict the Yen’s downside risk. Which might be related to escalating geopolitical tensions in the Middle East.

The Japanese parliament will hold a special session to debate the Bank of Japan’s most recent interest rate hike.

The Japanese parliament is set to have a special session on August 23 to address. The Bank of Japan’s (BoJ) decision to hike interest rates last month According to Reuters, the session. Convened by the lower house financial affairs committee, is slated to include BoJ Governor Kazuo Ueda.
The USDJPY pair gains support as pressure on the US Dollar eases. Due to lower expectations of a 50 basis point interest rate drop by the US Federal Reserve (Fed) in September. According to CME’s FedWatch Tool, the chances of a 50 basis point (bps) decrease in September have plummeted to 50% down from 85% last week. However, the rate markets continue to price in a 100% possibility of a 25 basis point drop at the June meeting.
Investors will likely focus on the US Producer Price Index (PPI) data. Which will be issued on Tuesday, and Consumer The Consumer Price Index (CPI) will be released on Wednesday. Traders are waiting for evidence that price growth in the United States will remain stable.

Daily Market Movers: Japanese Yen drops as chances of a 50 basis point Fed rate cut dwindle.

On Sunday, Federal Reserve Governor Michelle Bowman warned. That she sees further upside risks to inflation and continued labor market growth. Bowman warned that the Federal Reserve may not be prepared to decrease interest rates at its next meeting in September.
According to a Bloomberg story published last week, JP Morgan Asset Management (JPAM) believes the Bank of Japan is unlikely to hike interest rates in the short term. According to JPAM, the Bank of Japan may contemplate future rate hikes if the Federal Reserve
Cuts interest rates, and the US economy stabilizes. They believe that any future tightening by the BoJ is more likely to occur in 2025, if the global economic climate remains steady.
Furthermore According to the Bank of Japan’s Summary of Opinions from the Monetary Policy Meeting on July 30 and 31, several members feel economic activity and prices are progressing in the expected direction. They aim for a neutral rate of “at least around 1%” in the medium term.

BoJ Deputy Governor stated that the BoJ interest rate strategy will change if market volatility affects economic predictions, risk assessments, or projections.

Last week, BoJ Deputy Governor Shinichi Uchida stated. That the BoJ’s interest rate strategy will change if market volatility affects economic predictions, risk assessments, or projections. Given recent market volatility, he underlined the importance of closely monitoring the economic and pricing implications of their actions , indicating. “We must maintain the current degree of monetary easing for the time being.”
Moreover According to the minutes of the Bank of Japan’s June meeting, some members expressed concern about increased import prices as a result of the JPY’s recent drop, which could pose an inflationary risk. One member suggested that cost-push inflation could exacerbate underlying inflation by raising inflation expectations and causing wage rise.