USD/JPY struggles to extend recovery above 146.40 due to Yen’s safe-haven appeal

• USD/JPY faces pressure after recovering to near 146.40 amid firm Yen’s safe-haven appeal.
• Fears of global slowdown and a higher-than-expected BoJ rate hike have strengthened the Japanese Yen.
• The Fed is see reducing its key rates by 50 bps in September.

The USD/JPY pair faces pressure in an attempt to extend recovery above the intraday resistance of 146.40 in Tuesday’s European session. The asset struggles to extend its recovery due to the firm appeal of the Japanese Yen (JPY) as a safe haven.

Earlier, the major discovered buying interest after a five-day losing spell as the US Dollar (USD) bounced back from a fresh six-month low. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, jumps to near 103.00. Meanwhile, the Japanese Yen has also posted a fresh seven-month low at 141.70 against the US Dollar.

The appeal of the Yen as a safe haven has significantly improved due to fears of a global slowdown. Fears of a potential United States (US) slowdown have deepened as its labor market demand has slowed significantly. Also, the US Unemployment Rate has risen to 4.3%, which is the highest since November 2021.

Potential US economic vulnerability has also prompted expectations of bulk rate cuts by the Federal Reserve (Fed). According to the CME FedWatch tool, 30-day Federal Funds Futures pricing data shows that traders see a 50-basis point (bp) cut in interest rates in September as imminent.

Meanwhile, the Bank of Japan's (BoJ) larger-than-expected rate hike has also improved the Yen’s outlook. Last week, the BoJ raised its key interest rates by 15 bps and adjusted them to a range of 0.15%- 0.25%. Furthermore, the central bank announced tapering of monthly purchases of Japanese government bonds (JGBs) to ¥3 trillion, with effect from the first quarter of 2026.