USD/JPY steadily climbs back closer to 143.00 mark, seems poised to appreciate further

• USD/JPY scales higher for the second straight day and is supported by a combination of factors.
• The BoJ’s dovish stance and a positive risk tone continue to undermine the safe-haven JPY.
• Bets for more Fed rate hikes act as a tailwind for the USD and remain supportive of the move.

The USD/JPY pair builds on the previous day's goodish rebound from mid-141.00s, or a one-week low and gains some positive traction for the second successive day on Tuesday. Spot prices climb back closer to the 143.00 mark during the Asian session and draw support from a combination of factors.

A more dovish stance adopted by the Bank of Japan (BoJ), along with the overnight sharp rally in the US equity markets, is seen undermining the safe-haven Japanese Yen (JPY) and acting as a tailwind for the USD/JPY pair. It is worth recalling that the BoJ's Summary of Opinions released on Monday revealed that policymakers backed the case for the need to patiently continue with the current monetary easing towards achieving the price stability target. In contrast, Federal Reserve (Fed) officials said that additional interest rate hikes are likely as inflation remains persistently high and the labour market is still tight.

This comes after the closely-watched US monthly jobs report on Friday pointed to continued tightness in the labour market and raised hopes for a soft economic landing. This could allow the Fed to stick to its hawkish stance and keep the door wide open for one more 25 bps lift-off in September or November. The outlook remains supportive of elevated US Treasury bond yields and lends some support to the US Dollar (USD), which is seen as another factor pushing the USD/JPY pair. The USD bulls, however, seem reluctant to place aggressive bets ahead of the US consumer inflation figures, due for release on Thursday.

The crucial US CPI report will play a key role in influencing market expectations about the Fed's future rate-hike path, which, in turn, should rive the USD demand and help determine the next leg of a directional move for the USD/JPY pair. In the meantime, the better-than-expected release of the current account data from Japan does little to ease the intraday selling pressure around the domestic currency. This, in turn, suggests that the path of least resistance for spot prices is to the upside and supports prospects for a move back towards retesting the monthly top, around the 143.85-143.90 region touched last Thursday.

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