• The Japanese Yen attracts some buyers and snaps a two-day losing streak against the USD.
• A softer risk tone benefits the safe-haven JPY amid the BoJ’s hawkish tilt earlier this month.
• Hawkish Fed expectations continue to underpin the USD and could lend support to USD/JPY.

The Japanese Yen (JPY) ticks higher during the Asian session on Tuesday and recovers a part of its losses registered over the past two days, to the YTD low touched against its American counterpart the previous day. Against the backdrop of geopolitical risks and China's economic woes, bets that the Federal Reserve (Fed) might not cut interest rates as much as anticipated temper investors' appetite for riskier assets. Apart from this, the Bank of Japan's (BoJ) hawkish tilt, signalling conviction on hitting inflation goal and setting the stage to pull interest rates out of negative territory at its upcoming meetings in March or April, lends some support to the JPY. This, in turn, exerts some pressure on the USD/JPY pair, though the downside seems cushioned in the wake of a bullish US Dollar (USD).

In fact, the USD Index (DXY), which tracks the Greenback against a basket of currencies, stands tall near its highest level since November 14 as investors continue to scale back their expectations for aggressive Fed easing in 2024. The incoming US macro data suggests that the economy is in good shape and gives the Fed more headroom to keep rates higher for longer. Adding to this, comments by a slew of influential FOMC members, including Fed Chair Jerome Powell, reaffirmed the hawkish outlook, which remains supportive of elevated US Treasury bond yields and continues to underpin the Greenback. Furthermore, the recent widening of the US-Japan rate differential might continue to dim demand for the JPY and also contribute to limiting any meaningful corrective decline for the USD/JPY pair.