The USD/JPY pair has held steady during Asian trading hours, as market participants reflect on the recent drone strikes by Iran on Israel. The early drop to 152.93 from the previous close of 153.27 in New York has created an opportunity that bargain hunters couldn’t resist.

Despite the initial dip, the U.S. dollar is expected to remain attractive on any further declines, supported by the persistently high U.S. yields. The persistent issue of sticky inflation in the U.S. and the anticipation of a ‘higher-for-longer’ interest rate policy by the Federal Reserve are buttressing this sentiment. This environment is favorable for the dollar, as it often thrives in scenarios where yields are on the higher end.

In tandem with these expectations, U.S. 10-year Treasury futures saw a modest decline in early Asian trade, implying a yield of 4.51%. This slight shift underscores a cautious stance among investors, aligning with broader market uncertainties.

On the other side of the pair, Japan’s core consumer price index (CPI) is expected to rise. However, the increase in costs is placing a significant burden on consumption, indicating a challenging environment for the domestic economy. This could have implications for the Japanese yen, which remains sensitive to domestic economic indicators.

The stock market’s reaction is poised to play a pivotal role in setting the trading direction in Asia. The pair’s movement on Friday, ranging from 153.39 to 152.60, showcased the market’s sensitivity to equity performance. This will be an area to watch closely as market dynamics unfold.

As the new week kicks off in Asia, traders are keeping an eye on the range set early on Monday, from 152.93 to 153.27. Additionally, there is heightened alertness for potential verbal intervention from Japan, which could introduce volatility for the currency pair.

The USD/JPY pair’s stability is a reflection of the delicate balance in the current market, influenced by geopolitical events, economic data, and policy expectations. Traders will continue to navigate these factors as they develop, with a keen eye on both macroeconomic indicators and potential policy responses from Japan.