The Japanese Yen spikes on softer US inflation and gives the gain back
Softer US inflation pulled October Fed hike odds down to near 35%, and USD/JPY fell below 156.50 on the release. It finished back just under 157.50, its fourth straight close on the 157.00 handle. The Yen got the US number it needed and USD/JPY still closed a touch above where it opened.
In the latest market developments, softer US inflation has brought October Federal Reserve hike odds down to nearly 35%, resulting in a dip for USD/JPY below 156.50. The Japanese Yen has gained from this softer US inflation data, and the pair closed slightly above its opening level. The Bank of Japan raised its rate to 1.25% on September 18, with a 36% chance of another hike on October 30.
The Federal Reserve's rate range is 3.75-4.00%, creating a 2.5-point gap between the two policy rates. Markets now give the Fed and the BoJ a roughly equal one-in-three chance of hiking in October, with the gap between their policy rates narrowing to 2.5 points. The BoJ's Tankan survey of large manufacturers and the summary of opinions from their September meeting will be released on Wednesday at 23:50 GMT, with the September Consumer Price Index (CPI) expected on Thursday at 23:30 GMT.
Strong performance in the Tokyo market could lift October odds for the BoJ, while solid US payroll data would benefit the Fed. The Japanese Yen is heavily influenced by the Bank of Japan's policy decisions and the difference in bond yields between Japan and the US. The BoJ's policy recently shifted, narrowing the differential between the US Dollar and Japanese Yen. As a safe-haven currency, the Yen may strengthen in times of market stress.
Written by urgent.news from FXStreet's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
