USD/JPY consolidates near 157.95 ahead of US inflation data, while Bank of Japan signals for a December rate hike and the threat of currency intervention keep the pair under pressure.
BoJ board members see a near-term rate hike as necessary, with a December move likely, and September wage data supports further tightening. Japan already intervened on three days (record 7.98 trillion JPY on July 30) and Rabobank is cautiously optimistic, seeing yen strength on its own merits and possible repatriation into higher JGB yields. Q3 GDP and October CPI next week are further catalysts.
The pair trades near 157.95 with a slightly bearish bias below the 100-day SMA at 159.00. BoJ board members signalling a possible December rate hike and the threat of fresh intervention (a record 7.98 trillion JPY on July 30) argue for downside, and Rabobank targets 155.00 over 3 months. A hotter-than-expected US CPI on Tuesday (consensus 0.3% MoM headline, 0.2% core) could lift the dollar and offset yen strength.
Fed's Daly struck a hawkish tone (Speechtracker 8/10 vs 6.4 average), calling inflation the number one priority, and the FXS Fed Sentiment Index rose 0.95 to 143.10, a backdrop supportive of the dollar. But the decisive test is Tuesday's CPI, expected at 0.3% MoM headline and 0.2% core, and in-line or softer data would limit gains while a BoJ hike looms against the dollar.
Rabobank argues a more robust tone in the JGB market would be a component of any yen turnaround, and speculation that Japan's huge asset managers may repatriate into higher JGB yields supports the currency. A BoJ December hike, flagged in the meeting summary, would naturally pressure JGB yields higher, though the article gives no yield levels.
The USD/JPY pair holds near 157.95 as traders await US October CPI data, with headline inflation expected to rise 0.3% MoM. While the pair faces technical resistance at the 100-day SMA of 159.00, Bank of Japan board members have signaled a potential interest rate hike in December, supporting the yen's medium-term outlook.
The Bank of Japan's board signalled a near-term interest rate hike with a December move likely, September wage data supports tightening, and officials have already shown willingness to intervene, spending a record 7.98 trillion JPY on July 30 alone.
A hawkish Bank of Japan — the October meeting summary points to a possible December rate hike — plus the threat of renewed intervention and Rabobank's 155.00 target on a 3-month view all point down, but a hotter US CPI print on Tuesday could instead lift the dollar.
The US CPI report, with the headline expected to rise 0.3% MoM and core 0.2% in October; hotter inflation would reinforce the case for a Fed rate hike in December and boost the dollar.
Rabobank notes a stronger JGB market could provide a supportive backdrop for the yen, as higher yields might tempt Japan's large asset managers to repatriate funds.