Yen hits seven-month high with US dollar soft ahead of inflation data
The Japanese currency is lifted by hawkish BOJ bets and capital repatriation by Japanese investors.
The yen reached a seven-month high against the US dollar on September 7, as traders reassessed their outlook on the troubled currency. The Bank of Japan was expected to tighten monetary policy faster, leading investors to move their funds home. US inflation data, set to be released on September 11, would influence the Federal Reserve's decision to raise interest rates later in the month.
The European Central Bank was also set to meet on September 10, likely to raise euro-zone rates. However, the primary focus was on the yen, while the dollar experienced a 1.14% decrease against the Japanese currency, reaching a low of 154.42 - its lowest since February. The yen's strength stemmed from the previous interventions by Washington and Tokyo to bolster the currency, which had been at 40-year lows.
Senior currency analyst Lee Hardman at MUFG noted that breaking past the 155 level indicated bullish views on the currency. Further upside for the yen could be expected, as the market had previously viewed the yen as a one-way trade, weakening indefinitely. The euro also dropped by 1% against the yen to 179.5, while the dollar's decline against the yen also impacted other currencies.
Traders priced a 57% chance of a Federal Reserve rate hike later in September after the strong non-farm payrolls report on September 4. A better-than-expected inflation print would likely seal a September hike, strengthening the dollar and pushing it to new cyclical highs, provided other major central banks did not tighten policy simultaneously.
Written by urgent.news from Straits Times Business's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
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