The Japanese Yen (JPY) started the new week on a weaker note, dropping to its lowest level since May 15 against the broadly stronger US Dollar (USD) during the Asian session. The Bank of Japan (BOJ) last week signaled its preference to move cautiously in normalizing its still-loose monetary policy, forcing investors to scale back their expectations about the likely timing of the next interest rate hike.

In addition, concerns that the US tariffs of 25% on Japanese vehicles and a reciprocal levies of 24% on other imports will impact the Japanese economy turned out to be another factor that weakened the JPY.

Meanwhile, Japan's annual National Consumer Price Index (CPI) remained well above the BOJ's target of 2% in May, giving the central bank more incentive to raise interest rates again in the coming months.

Moreover, a better-than-expected release of Japanese PMIs on Monday supported the possibility of further BOJ rate hikes. Moreover, the risk of further escalation of geopolitical tensions in the Middle East, following the US bombing of a key nuclear site in Iran on Sunday, could benefit the JPY's relative safe-haven status. This might further contribute towards capping gains for the USD/JPY pair. (alg)

Source: FXstreet