Traders could remain cautious after the yen's strong rebound since the middle of July as the currency reacted to speculation of interest rate hikes and suspected market interventions from the Bank of Japan.
The possibility of a BoJ rate hike could lead to higher Japanese bond yields however they could see some volatility in case of a surprise. These actions would represent a significant shift in Japan's monetary policy, affecting bond yields.
Risks of escalating geopolitical tensions in the Middle East and elsewhere could boost flows toward safe-haven assets, benefiting the yen.
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