Global currency markets react to US sanctions and BoJ policy shifts

Global currency markets are reacting to shifting monetary policy expectations and geopolitical tensions. The US Dollar Index (DXY) has held gains near 99.00, supported by safe-haven demand following the expansion of US secondary sanctions against entities trading with Iran. Additionally, US Treasury Secretary Scott Bessent has announced plans to double bond buyback operations to stabilize long-term yields.

In Japan, the Yen remains a focal point as market participants shift focus from previous large-scale currency interventions toward Bank of Japan (BoJ) fundamentals. Following significant intervention in July, the USD/JPY pair has established a range, with traders closely watching for potential BoJ rate hikes in September.

Meanwhile, the Euro has shown resilience against the Yen as the policy paths of the European Central Bank (ECB) and the BoJ diverge. While the ECB faces pressure from persistent eurozone inflation, the BoJ is signaling a move toward normalizing its ultra-loose monetary policy. Investors are also awaiting key US economic data, including the Personal Consumption Expenditures (PCE) index, and Federal Reserve Chair Kevin Warsh’s upcoming address at Jackson Hole.