USD/JPY Weekly Preview: Yen faces upward pressure as yields climb before Fed and BoJ decisions

US Dollar Strengthens Amid Middle East Tensions

Rising instability in the Middle East has significantly boosted the US dollar, giving the United States a favorable trade advantage while also increasing concerns about global inflation. As energy costs climb, financial markets are scaling back their expectations for substantial interest rate reductions by the Federal Reserve, resulting in higher Treasury yields across longer maturities.

For the United States, factors such as energy independence, increasing yields, and a renewed appetite for safe-haven assets have combined to propel the dollar index to its highest point since mid-2025. This surge has intensified pressure on other economies and currencies.