Japanese yen has attracted some haven flows.

The Japanese yen (JPY) gets some traction on the opening day of a new week, moving away from its lowest level since November 28 versus the US dollar (USD), which it reached on Friday. Against the backdrop of concerns over China’s slowing economic growth, the danger of further escalation of geopolitical tensions in the Middle East is regarded as benefiting the JPY’s relative safe-haven position. Meanwhile, the flight To safety causes a minor fall in US Treasury bond rates, keeping USD bulls on the defensive and putting negative pressure on the USDJPY pair.

Bets that the BoJ would maintain its dovish stance on Tuesday may limit any additional advances.

Any major appreciation for the JPY, however, appears elusive in light of rising predictions that the Bank of Japan (BoJ) will maintain its ultra-dovish stance at the conclusion of a two-day policy meeting on Tuesday. Aside from that, a generally upbeat tone in the equities markets may help to contain JPY gains. Furthermore, the Federal Reserve’s (Fed) declining likelihood of cutting interest rates soon should limit the downside for US bond yields. This should operate as a tailwind for the USD and the USDJPY pair, justifying caution. For bearish traders.

Daily Market Movers: Japanese Yen is supported by recovering safe-haven demand and lower USD

The Japanese yen recovers further from a multi-week low, but may struggle on expectations that the Bank of Japan will maintain its ultra-dovish monetary policy stance on Tuesday.

The bets were reaffirmed by Friday’s statistics, which showed that the headline Consumer Price Index (CPI) in Japan and the core gauge fell to their lowest levels since June and July 2022, respectively.

Furthermore, the New Year’s Day earthquake in Japan and lackluster domestic wage growth data indicate that the Bank of Japan is unlikely to depart the decade-long accommodating regime anytime soon.

The preliminary survey data from the University of Michigan shows that Friday’s US Consumer Sentiment Index Safety prompts a slight drop in US Treasury bond yields, keeping USD bulls on the defensive and exerting downward pressure on the USDJPY pair.

Any significant appreciation in the JPY, however, remains elusive in light of mounting expectations that the Bank of Japan (BoJ) would retain its ultra-dovish stance at the end of a two-day policy meeting on Tuesday. Aside from that, an overall positive tone in the stock market may aid to limit JPY gains. Furthermore, the Federal Reserve’s (Fed) diminishing likelihood of cutting interest rates soon could limit the negative impact on US bond yields. This should act as a tailwind for the USD and the USDJPY pair, warranting caution. increased from 69.7 in December to 78.8 last month, reaching its highest level since July 2021.

Diminishing odds for further aggressive Fed policy easing could give support to USDJPY.

According to CME Group’s FedWatch Tool, traders now believe May is the most likely month for a Fed rate decrease announcement, with the chances of a change at the March monetary policy meeting decreasing to 50%.

Meanwhile, consumers’ inflation predictions for the next 12 months were the lowest in three years, supporting the idea that the US central bank will begin decreasing interest rates in the first half of this year.

Aside from that, the potential of further escalation of geopolitical tensions in the Middle East, as well as China’s economic troubles, all of which benefit the safe-haven JPY, put pressure on the USDJPY pair.

The US launched an airstrike on a Houthi anti-ship missile on Sunday. Its eighth round of attacks since the Iran-supported movement The organization started targeting merchant vessels in the Red Sea.

Since October 17, there have been at least 140 attacks against US bases. With seven in the last week, including significant military strikes on the Ain al-Assad facility in Iraq. Which injured both US and Iraqi personnel.

Iran has pledged vengeance for yesterday’s strike in Damascus that killed five top military officers. Which it blamed on Israel, which has neither confirmed nor denied involvement.

Israeli soldiers and Hamas members battled in numerous locations on Sunday. While Israeli planes began intensive shelling of Khan Younis in the southern Gaza Strip.

Israeli Prime Minister Benjamin Netanyahu appeared to rule out a two-state solution to the conflict saying. That Israel must maintain security control over everything region west of Jordan.