The Japanese yen trimmed earlier losses on Tuesday, staging a modest rebound as the U.S. dollar lost momentum alongside a pullback in Treasury yields. After initially weakening during Asia trading hours, the yen recovered in the European session, with markets reassessing global rate expectations and geopolitical risks.
USD/JPY slipped back below 154.00, after touching an intraday high earlier in the day, as demand for the greenback softened in tandem with falling U.S. 10-year yields. Investors appeared cautious ahead of key U.S. data later this week, while uncertainty around the Federal Reserve’s next move kept risk sentiment in check.
The yen’s recovery also came amid persistent speculation over potential intervention by Japanese authorities. While officials have remained tight-lipped, the currency’s proximity to multi-decade lows has prompted warnings from Tokyo, fueling some defensive buying.
“Markets are still wary of the Ministry of Finance stepping in if the yen weakens too quickly,” said a Tokyo-based FX strategist. “That’s providing some backstop for now, even if fundamentals still lean in favor of the dollar.”
The Bank of Japan’s ultra-loose policy continues to weigh on the yen, especially as the Fed maintains a relatively hawkish stance. However, with inflation showing signs of easing in the U.S. and global growth concerns resurfacing, traders are increasingly cautious about chasing further dollar strength.
The USD/JPY pair remains highly sensitive to shifts in rate differentials, central bank signals, and geopolitical developments. For now, the yen’s rebound suggests markets may be growing more defensive ahead of key macro catalysts.
