• USD/JPY loses ground to near 158.85 in Monday’s Asian session. 
• US inches toward Iran peace deal.  
• Markets expect a June BoJ rate hike despite softer-than-expected Japan CPI inflation data. 

The USD/JPY pair edges lower to around 158.85, snapping the two-day winning streak during the Asian trading hours on Monday. The US Dollar (USD) weakens against the Japanese Yen (JPY) amid signs of a US-Iran deal to reopen the Strait of Hormuz. 

US President Donald Trump said on Sunday that Washington and Iran had “largely negotiated” a memorandum of understanding on a peace deal that would reopen the Strait of ‌Hormuz, per Reuters.

“Markets have become conditioned to be incredibly patient on a tangible breakthrough, but the base case of a deal remains firm, with the weekend news providing further conviction, even if the timing remains unclear,” said Chris Weston, head of research at Pepperstone Group Ltd in Melbourne.

A lack of clarity over when the critical waterway would open kept enthusiasm in check. Trump stated that the US blockade in the Strait of Hormuz “will remain in full force and effect until an agreement is reached, certified, and signed.”

Japan’s National Consumer Price Index (CPI) rose by 1.4% YoY in April, compared to 1.5% in March. Meanwhile, core CPI inflation eased to a four-year low of 1.4% YoY during the same period. The data is among the factors the Bank of Japan (BOJ) will scrutinize at June’s policy meeting, where the board is widely expected to raise its short-term policy rate to 1.0% from 0.75%.

Analysts see inflation accelerating in the coming months, as elevated oil costs and supply disruptions caused by the Middle East conflict prompt firms to raise prices for a broad range of products. 

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