Yen Edges Higher as Dollar Bulls Hesitate Amid Hormuz Optimism

USD/JPY slipped modestly in Asian trading on Thursday, snapping a three-day winning streak, though the downside remained limited. The spot price was last seen near 159.20, as markets turned cautious ahead of key events. Dollar bulls appeared hesitant amid easing tensions in the Strait of Hormuz, failing to extend the prior upward momentum.

**Yen Supported by Multiple Domestic Factors**

The yen's mild strength was partly underpinned by hawkish policy expectations at home. The Bank of Japan's recent meeting minutes signaled the possibility of further rate hikes, and upbeat wage growth data provided fundamental support for the currency. Market chatter suggested that bets on BOJ policy normalization were building a floor under the yen, capping USD/JPY's rebound potential.

**Geopolitical and Central Bank Risks Intertwine**

External conditions also weighed on the pair. Reports indicated that the U.S. had shifted toward seeking a diplomatic solution to reopen the Strait of Hormuz, which alleviated energy-driven inflation concerns and sent crude prices tumbling, diminishing the dollar's appeal as a safe haven. However, the greenback's downside remained constrained. According to Chris Turner, Global Head of Markets at ING, the dollar's failure to weaken broadly could be attributed to lingering uncertainty over whether the Fed would deliver a rate cut in September. Investors now turned their attention to the upcoming U.S. ISM manufacturing survey, JOLTS job openings data, and Friday's closely watched nonfarm payrolls report to gauge the Fed's next policy move.