Yen Weakens as AI Trade Revives USD/JPY Bulls, Japanese Finance Minister Calls for Currency to Reflect Fundamentals

The Japanese yen extended losses against the dollar on Tuesday as a resurgent AI-driven equity trade boosted USD/JPY bulls, with Investing.com noting that the pair's recovery was closely tied to renewed momentum in AI-related assets. The yen was the weakest major currency in early European trading, sitting at the bottom of a currency strength ranking that placed the New Zealand dollar and Australian dollar at the top.

Japanese Finance Minister Satsuki Katayama added to the day's yen focus, saying the currency must shift to reflect economic fundamentals and pledging to sustain market confidence through clear and consistent communication around the Takaichi administration's fiscal approach. Her remarks are the latest in a series of public signals from Tokyo aimed at managing expectations ahead of the Bank of Japan's rate decision due Friday, a meeting that traders will watch alongside the Federal Reserve's Wednesday decision for directional cues on the dollar-yen pair.

Elsewhere in currency markets, the EUR/USD pair softened toward 1.1150 during early European hours, with bearish momentum intact below the 100-day Simple Moving Average. Renewed fiscal stress across the eurozone, driven by concerns over France's budget trajectory, continued to weigh on the euro. The AUD/USD pair held above 0.7000 but again struggled to clear its own 100-day SMA hurdle, with traders bracing for an Australian CPI print and a Reserve Bank of New Zealand decision that analysts flagged as a potential catalyst for a sharp move in both the Australian and New Zealand dollars.

The Reserve Bank of Australia separately issued a warning that Australia's A$4.4 trillion superannuation system faces emerging risks from the AI investment boom and geopolitical shocks, adding a longer-term dimension to the region's financial stability conversation.