The Japanese yen declined in Asian trading on Monday against a basket of major and minor currencies, retreating from a two-week high versus the US dollar. The drop came amid profit-taking and a rebound in the greenbacks strength across the forex market.

Last weeks Bank of Japan meeting paved the way for further normalization of monetary policy. However, uncertainty remains over whether interest rates will be raised in September, prompting investors to await stronger evidence regarding the central banks policy path for the remainder of the year.

Price Overview

USD/JPY rose by 0.35% to 147.91, up from the opening price of 147.38, after recording a session low of 147.05.

On Friday, the yen jumped 2.2% against the dollar, marking its biggest daily gain since April 10 and its first advance in three sessions, as it rebounded from a four-month low of 150.92.

Aside from buying interest at lower levels, the yen strengthened sharply after Japanese authorities voiced concern over excessive currency movements, coupled with weak US job data.

As a result, the yen ended last week with a 0.2% gain against the dollar, posting its second consecutive weekly advance.

US Dollar

The US Dollar Index rose 0.3% on Monday, attempting to recover from Fridays sharp losses, reflecting a rebound in dollar demand against a basket of global currencies.

This rebound comes as markets await more concrete signals on the likelihood of a US rate cut in September, especially in light of comments from several Federal Reserve officials.

Japanese Interest Rates

The Bank of Japan last week signaled the possibility of resuming interest rate hikes, citing the persistent rise in food prices as a broad inflationary risk.

The central bank confirmed it would raise rates if economic and price conditions align with its outlook.

BoJ Governor Kazuo Ueda described the recent US-Japan trade agreement as a major step toward enhancing economic stability by reducing long-standing uncertainty that had weighed on future expectations.

Market pricing for a 25-basis-point rate hike by the BoJ in its September meeting remains around 50%.

Investors are now watching upcoming data on inflation, unemployment, and wage growth in Japan to reassess the outlook.