• USD/JPY hovers near its highest level since late April on Tuesday.
• The Israel-Iran ceasefire is reducing safe-haven demand and weighing slightly on the US Dollar.
• Renewed intervention threats from Japanese authorities are supporting the Japanese Yen.

USD/JPY trades around 160.15 on Tuesday at the time of writing, remaining close to its highest level since April 30 despite a broadly neutral intraday performance. The pair retains an underlying bullish bias, supported by expectations that US monetary policy will remain restrictive, although upside potential is being capped by the risk of intervention from Japanese authorities.

Market sentiment improved slightly after Iran and Israel confirmed they had halted direct attacks following an appeal from US President Donald Trump. This development weighed on the US Dollar (USD), as reduced demand for safe-haven assets pressured the Greenback against several major currencies.

At the same time, geopolitical tensions remain elevated. Israel ordered the evacuation of several neighborhoods in the Lebanese city of Tyre ahead of further strikes despite the truce between Israel and Iran. According to Al Jazeera Arabic, at least eight people were killed in an Israeli airstrike on the southern Lebanese city. The situation continues to encourage caution among investors and limits the downside in the US Dollar.

On the Japanese side, the currency continues to draw support from official warnings against excessive foreign exchange market moves. Japan’s Finance Minister Satsuki Katayama reiterated on Tuesday that the government remains ready to take decisive action to support the domestic currency if necessary. These comments are helping to restrain buying interest in USD/JPY as the pair remains above the key 160.00 psychological level.

In addition, expectations of further monetary policy tightening by the Bank of Japan (BoJ) continue to support the Japanese Yen (JPY). Investors still anticipate additional rate hikes in the coming months, while the central bank may also continue reducing its Bond purchases.

However, the Japanese Yen is struggling to strengthen further due to concerns about the economic impact of Middle East tensions and potential risks to energy supplies through the Strait of Hormuz. Donald Trump stated that a deal with Iran could be signed within the next three days and added that the Strait of Hormuz would fully reopen once such an agreement is reached.

Investors are now turning their attention to upcoming US inflation releases. The Consumer Price Index (CPI) is due on Wednesday, followed by the Producer Price Index (PPI) on Thursday. These reports will be crucial in shaping expectations for the next moves by the Federal Reserve (Fed) and could determine the next directional move in USD/JPY.