• The USD/JPY pair rose to 158.30 at the start of Tuesday’s Asian session.
• Federal Reserve officials confirmed significant progress on inflation.
• The growth of this currency pair may be confined due to fears of intervention by Japanese authorities in the currency market.

The USD/JPY pair is trading stronger around the 158.30 level during early Asian trading on Tuesday. The pair’s gains are being boosted by a modest rebound in the U.S. dollar (USD). Investors will take more cues from June U.S. retail sales data and a speech by Federal Reserve (Fed) Adriana Kugler.

Fed Chairman Jerome Powell said Monday that three U.S. inflation readings this year “somewhat increase confidence” that inflation is on track to meet the Fed’s goal in a sustainable manner, suggesting a move to rate cuts may not be far off. Fed Bank of San Francisco President Mary Daly said inflation is falling in a way that increases confidence that it is headed toward 2%. But Daly added that more information is needed before making a decision on interest rates.

Growing speculation that the US Federal Reserve will cut borrowing costs could undermine the US dollar in the near future. According to CME’s FedWatch Tool, the market is currently pricing in a 100% probability that the federal funds rate will fall by at least 25 basis points when the Federal Open Market Committee (FOMC) meets in September.

Potential intervention in the foreign exchange (FX) market by Japanese authorities could provide some support for the Japanese yen (JPY). On Friday, Japanese Finance Minister Shunichi Suzuki stressed that wild currency fluctuations were undesirable. Meanwhile, Japanese Chief Cabinet Secretary Yoshimasa Hayashi said he was “ready to take all possible measures in the forex market.”