USD/JPY Recovers Intraday Losses Above 148.00
- Investors Eye US Inflation Data for September
- Decline in Japan’s Household Spending May Impact BoJ Rate Hike Bets
The USD/JPY has rebounded from its intraday losses and surged above 148.00 during Tuesday’s North American session. This upward movement is driven by the strength of the US Dollar (USD), which is striving to extend its gains. The US Dollar Index (DXY), reflecting the Greenback’s performance against six major currencies, remains near a seven-week high of 102.50.
US Dollar Strength and Federal Reserve Expectations
The US Dollar has maintained its firmness as market expectations for the Federal Reserve (Fed) to implement a larger-than-usual interest rate cut of 50 basis points in November have diminished. Traders have adjusted their forecasts for November’s Federal Fund rate and now anticipate a 25-bps rate cut, bringing interest rates to 4.50%-4.75% post the release of the September Nonfarm Payrolls (NFP) report. The latest employment data indicates robust labor demand, a deceleration in the Unemployment Rate, and strong wage growth.
Upcoming US Inflation Data
Looking ahead, market participants will closely monitor the US Consumer Price Index (CPI) data for September, set to be released on Thursday. Economists project a steady growth in core CPI (excluding food and energy prices) by 3.2%. Annual headline inflation is expected to have eased to 2.3% from 2.5% in August. The impact of inflation on Fed rate cut expectations is anticipated to be minimal, as policymakers prioritize stimulating consumer spending and job creation.
Implications of Japan’s Household Spending Decline
In Japan, the Overall household spending declined by 1.9% in August, falling short of the anticipated 2.6% contraction. This slowdown in consumer spending, following a marginal growth of 0.1% in July, is likely to dampen expectations of further rate hikes by the Bank of Japan (BoJ) in the final quarter of the year.
Japanese Yen FAQs
The Japanese Yen (JPY) is among the most traded currencies globally, influenced by various factors such as the Japanese economy’s performance, Bank of Japan policies, bond yield differentials between Japan and the US, and traders’ risk sentiment.
Key Points to Note:
- The BoJ’s interventions in currency markets impact the Yen’s value.
- Policy divergence between major central banks affects the Yen’s strength.
- The Yen is considered a safe-haven investment during market turbulence.