NEW YORK: The yen lost ground on Tuesday, coming off its biggest one-day percentage rise since mid-July as the currency strengthened on comments from Japan’s top central banker, while the US dollar gained as investors looked towards the latest reading on inflation.

The greenback strengthened 0.38% at 147.15 against the yen on Tuesday, recovering somewhat from its biggest daily weakening against the yen since July 12 after comments from Bank of Japan (BOJ) Governor Kazuo Ueda heightened expectations the central bank could shift away from its negative interest rate policy.

However, influential ruling party lawmaker Hiroshige Seko indicated his preference for an ultra-loose monetary policy on Tuesday.

The yen has come under pressure against the dollar as the BOJ remains a dovish outlier among global central banks, especially since the Federal Reserve began its aggressive rate-hike cycle in March 2022.

“Even if the Bank of Japan were to move off the negative rate setting, the reality is that interest rate differentials would remain absolutely vast,” said Karl Schamotta, chief market strategist at Corpay in Toronto.

“So we did have that sort of knee jerk over-reaction and it is something we have seen repeatedly in recent years here, sort of this triumph of hope over experience that markets keep going through.”