Yen Gains as Japanese Politicians Pressure BOJ; Dollar Inches Amid Inflation Data Wait

The yen rose as Japanese politicians urged the Bank of Japan to continue rate hikes. Meanwhile, the dollar climbed slightly as traders awaited U.S. inflation data, and the Australian and New Zealand dollars fell following China's rate cuts aiming to stimulate economic growth.

The yen rose on Tuesday as comments from senior Japanese politicians increased pressure on the Bank of Japan (BOJ) to continue hiking rates to strengthen the currency. The dollar, meanwhile, gained slightly as traders awaited key inflation data later in the week, affecting Australian and New Zealand dollars following China's unexpected rate cut.

The dollar declined 0.55% against the yen, trading at 156.13, after hitting a five-week low. Toshimitsu Motegi, a senior ruling party official, urged the BOJ to clearly indicate its commitment to normalizing monetary policy, including steady rate hikes. The BOJ will set rates on July 31.

The yen also gained support from recent Tokyo interventions and political comments, although most economists polled by Reuters expect the BOJ to hold rates steady. The dollar index slightly rose to 104.36. The euro dropped 0.22% to $1.0868 and sterling fell 0.15% to $1.2911, with trading subdued pending U.S. inflation data. President Joe Biden's decision to withdraw from the election saw limited market reaction. Meanwhile, the Australian and New Zealand dollars hit lows as China's significant rate cuts signaled efforts to boost its economy.