Yen retreats as rising oil prices revive inflation and Fed hike bets

The Japanese Yen came under renewed pressure on Monday as the US Dollar advanced and investors reassessed the outlook for global interest rates. USD/JPY climbed around 0.7% to near 154.61 after the Yen had recently reached a seven-month high.

The latest move was driven by a combination of rising oil prices, higher global bond yields and stronger expectations for Federal Reserve tightening. Brent crude moved toward $108 a barrel, increasing concerns that energy inflation could remain persistent.

At the same time, expectations for further Bank of Japan tightening continue to provide underlying support for the Yen. This leaves USD/JPY highly sensitive to the relative policy outlook between the Fed and BoJ.

Traders will focus on upcoming central-bank decisions and inflation signals. A hawkish Fed could keep USD/JPY elevated, while stronger BoJ tightening expectations could renew Yen buying.