USD/JPY recovers sharply to near 147.70 as Japanese Yen underperforms

• USD/JPY gains as the Japanese Yen weakens despite accelerating BoJ's hawkish bets
• BoJ minutes of the July meeting showed that officials are confident about tightening the monetary policy further by the year-end.
• The Fed is almost certain to cut interest rates next month.

The USD/JPY pair trades 0.35% higher to near 147.70 during the European trading session on Tuesday. The pair gains after attracting significant bids after refreshing the 10-day low around 146.60 earlier in the day.

An underperformance by the Japanese Yen (JPY) has contributed significantly to a decent recovery move in the pair. The Japanese currency trades weakly even as the minutes of the Bank of Japan's (BoJ) June monetary policy meeting signal that officials are confident about raising interest rates further by the year-end.

The support for further policy tightening from BoJ policymakers at a time when the global economy was grappling with uncertainty surrounding the tariff policy announced by United States (US) President Donald Trump.

Meanwhile, a sight recovery move by the US Dollar (USD) has also contributed to the USD/JPY's rebound. The US Dollar Index (DXY), which tracks the Greenback's value against six major currencies, trades higher to near 99.00, rebounds from its weekly low of 98.60.

However, the outlook of the US Dollar remains uncertain as traders have become increasingly confident that the Federal Reserve (Fed) will cut interest rates in the September policy meeting.

According to the CME FedWatch tool, the probability of the Fed to cut interest rates in the September meeting stands at 92.2%. Traders raised Fed dovish bets as the Nonfarm Payrolls (NFP) report for July signaled a slowdown in the labor demand.