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USD/JPY fell 0.62% on Tuesday, marking its second consecutive decline, as hopes for a peace deal between the US and Iran pressured the US Dollar. The pair initially pushed toward 160.00 but faced strong resistance, closing near 158.70. The yen, often seen as a safe-haven asset, gained traction amid reduced geopolitical tensions and expectations of dovish Federal Reserve policies. Market participants are now watching for further USD weakness against majors, particularly against the yen and euro, as central bank decisions and Middle East developments remain key drivers.
The decline in USD/JPY highlights the Dollar's vulnerability to both geopolitical and monetary factors. With the Fed likely to maintain a cautious stance on rate hikes, the USD faces downward pressure against carry-trade currencies like the yen. Traders should monitor the 158.00 level for potential support and the 160.00 psychological barrier for resistance. Additionally, any progress in US-Iran negotiations could amplify the yen's appeal, further weighing on the Dollar.
For Gulf investors, the weakening USD may present opportunities in yen-denominated assets and Japanese equities. However, volatility remains elevated due to ongoing Middle East tensions and Fed policy uncertainty. Key watchpoints include the Fed's inflation data releases and potential shifts in US-Iran relations. The pair's trajectory will also depend on whether the 158.00 level holds as a floor or if further declines toward 157.00 occur.
