Japanese Yen strengthens against US Dollar as inflation backs BoJ rate hike bets
USD/JPY trades around 158.85 on Friday at the time of writing, edging lower after rebounding from the 158.00 level on Thursday.
The Japanese Yen (JPY) showed strength against the US Dollar (USD) as inflation data bolstered expectations of further monetary tightening in Japan, while the US Dollar remained close to its lowest levels since May. Japan's core Consumer Price Index (CPI) rose 1.8% year-over-year in July, marking its fastest pace since January, and the index excluding both fresh food and energy accelerated to 1.9%.
These figures reinforced the anticipation of the Bank of Japan (BoJ) normalizing its monetary policy. The prospect of higher Japanese interest rates provided support to the Yen, although the significant interest rate gap between the US and Japan limited the Yen's appreciation. On the US side, the US Dollar Index (DXY) remained near its lowest level since May 14, as investors reduced expectations of immediate Fed tightening.
US economic data, however, demonstrated resilience, with the preliminary S&P Global Composite PMI accelerating to 56 in August from 54.5 in July, signaling a faster expansion in private-sector activity. This resilience may limit downside pressure on the USD, maintaining the higher-for-longer interest rate scenario in the United States.
Written by urgent.news from FXStreet's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
