The Japanese Yen strengthened against the US Dollar as investors increased expectations that the Bank of Japan could gradually adjust its monetary policy in response to persistent inflationary pressures. Comments from BOJ officials suggesting greater flexibility fueled renewed demand for the Japanese currency.

USD/JPY declined after reaching multi-week highs, as traders reduced long-dollar positions ahead of further policy guidance from Japanese authorities. The narrowing policy gap between the Federal Reserve and the Bank of Japan continues to influence sentiment in the currency market.

Commodity-linked currencies, including the Australian Dollar and New Zealand Dollar, traded within a narrow range as investors awaited fresh economic data from China. Any improvement in Chinese economic activity could provide additional support for export-driven economies in the Asia-Pacific region.

Looking ahead, market participants will closely monitor upcoming US inflation data, which remains one of the key indicators shaping expectations for future Federal Reserve policy decisions. Inflation trends are likely to remain the primary driver of currency market volatility.