The Japanese Yen (JPY) recovered early losses against the US Dollar (USD), with the USD/JPY pair stabilizing around 158.50 during the European trading session on Tuesday, as market sentiment improved following geopolitical developments in the Middle East [1][2]. US President Donald Trump announced a five-day pause on military attacks against Iran's power plants, which boosted risk appetite and led to a decline in the US Dollar Index (DXY) from an intraday high of 99.45 to around 99.15 [1][2]. However, Iran's foreign ministry denied any direct dialogue with the US, and the White House described the situation as 'fluid,' cautioning that speculation about meetings should not be considered final until formally announced [2].
In currency markets, the US Dollar was the weakest against the British Pound this week, while it gained 0.14% against the Japanese Yen [2]. The USD/JPY pair moved sideways near 158.50 after closing lower on Monday [2]. On the data front, Japan's National Consumer Price Index (CPI) excluding fresh food for February came in at 1.6% year-on-year, below estimates of 1.7% and the previous reading of 2% [1]. Another source reported the National CPI rose 1.3% year-on-year, the lowest since March 2022 [2][4]. Bank of Japan (BoJ) Governor Ueda expressed confidence that underlying inflation would accelerate moderately, supported by a tight labor market and active wage and price-setting behavior [1].
Elsewhere, the GBP/JPY cross reversed an intraday dip to the 212.30-212.25 region and traded nearly unchanged around 212.65-212.70, as traders awaited UK PMI data for further direction [4]. The Bank of England's hawkish outlook, with potential rate hikes as early as April due to inflation concerns from the Iran conflict, supported the GBP, while the weak Japanese CPI data weighed on the JPY [4]. However, speculation about possible intervention by Japanese authorities to stem further JPY weakness limited aggressive bullish bets on GBP/JPY [4].
The AUD/JPY pair extended losses for a second session, trading near 111.00 and testing the lower boundary of its ascending channel, though the near-term bias remained neutral with a slight bullish tilt as the pair consolidated above the 50-day EMA [3]. Technical analysis suggested a potential rebound toward 111.50 or a further decline to support at 110.60 or 109.60 [3].
In broader markets, US stock index futures initially turned positive but later traded in negative territory, while oil prices (WTI) rebounded about 1.5% after losing more than 9% on Monday, and gold (XAU/USD) erased early losses to consolidate above $4,400 [2].
CONCLUSION
The Japanese Yen's recovery was driven by improved risk sentiment following a pause in US-Iran tensions, though mixed signals from inflation data and central bank commentary kept the outlook uncertain. While the BoJ remains cautiously optimistic on inflation, weak CPI figures and ongoing geopolitical risks continue to weigh on the Yen. Market participants remain attentive to further developments in the Middle East and upcoming economic data for clearer direction.