The Japanese yen (JPY) halted the previous day's decline against its US counterpart, although it lacked bullish conviction and remained close to the multi-month lows hit last week.

The Bank of Japan's (BOJ) cautious stance on further interest rate hikes, coupled with the Federal Reserve's (Fed) hawkish policy shift, dampened expectations of a sharp narrowing in the US-Japan interest rate differential.

This, along with a generally positive risk tone, continued to act as a headwind for the JPY.

Meanwhile, a potential BOJ rate hike in January or March remains on the table following the recent strong Japanese inflation data.

Moreover, persistent geopolitical risks stemming from the ongoing Russia-Ukraine war and tensions in the Middle East, coupled with trade war concerns, provided some support to the JPY as a safe haven. Moreover, a subdued US Dollar (USD) price action capped gains for the USD/JPY pair amid concerns over possible intervention by the Japanese authorities.

Source: FXStreet