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USD/JPY edges higher as US PCE and sanctions focus return

The pair trades near 159.1 after rebounding from an intraday low of 158.55, while the US dollar index attempts to recover the 99.0 level ahead of the PCE release.

Reported · Written up by our desk · Major Pairs

USD/JPY rose modestly on Monday as the US dollar stabilized after last week’s sharp volatility, with geopolitical developments moving back into focus as the United States prepares to widen secondary sanctions against Iran, according to FXStreet.

At the time of writing, the pair traded around 159.13, after recovering from an intraday low of 158.55. FXStreet also noted that hawkish expectations for the Bank of Japan are providing limited support to the yen, with fiscal concerns still weighing on sentiment.

The BoJ is widely expected to raise interest rates in September, and recent inflation figures have reinforced the case for higher rates. Scotiabank strategists said the USD/JPY narrative is shifting as near term anxiety over potential Japan intervention fades, with market attention turning to the September 18 BoJ meeting.

FXStreet added that traders are also looking to Wednesday’s US Personal Consumption Expenditures (PCE) Price Index for clues on the Federal Reserve’s September decision. It cited that a softer inflation print could support expectations that the Fed will leave rates unchanged next month, after the US Treasury expanded liquidity-support buybacks for longer-dated government bonds that helped push the dollar to three month lows, with the US dollar index around 98.95.

Latest closeUSD/JPY 159.31 ▼0.1%|Dollar index 99.64 ▼0.3%

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