• The Japanese Yen advances due to rising odds of a further rate hike by the BoJ.
• Due to political uncertainty, the Yen may face challenges; Prime Minister Fumio Kishida will not seek re-election in September.
• The US Dollar faces pressure from declining US Treasury yields and increasing bets on a Fed rate cut.

The Japanese Yen (JPY) bounced back against the US Dollar (USD) on Friday, potentially due to the recent growth in Japan’s second-quarter GDP, which lends support to the possibility of a near-term interest rate hike by the Bank of Japan (BoJ).

However, the JPY might encounter challenges due to political uncertainty in Japan, sparked by reports that Prime Minister Fumio Kishida will not seek re-election as party leader in September, effectively concluding his term as prime minister.

The USD/JPY pair edges lower as the US Dollar loses ground amid lower Treasury yields. Additionally, traders fully price in a 25 basis point rate reduction by the US Federal Reserve for September, according to the CME FedWatch tool.