USD/JPY trades near 159.65, maintaining a bullish bias above the 158.34 support level, even as the Yen gains ground following a hotter-than-expected 0.7% MoM producer price inflation print.
Japan's October PPI beat hard at 0.7% MoM and 7.1% YoY versus 6.5% expected, feeding BoJ rate-hike hopes, while the Fed is fully priced for a December hike, keeping both currencies bid. The pair sits at 159.65 after printing an over two-month high of 159.94 on Wednesday and holds above its 20-day EMA at 158.34, a consolidation breakout that favors further upside as long as that support holds.
The US Dollar Index hit a fresh 18-month high at 103.08 as markets are fully priced for a December Fed rate hike following hawkish commentary including Waller's 50-bps option. Rabobank argues the midterm election result removes the risk of political pressure on the Fed, clearing a hurdle from the dollar's outlook.
Japan's October producer prices rose 0.7% MoM and 7.1% YoY against estimates of 0.3% and 6.5%, a clear inflation surprise that strengthens hopes of near-term BoJ rate hikes. The yen was the strongest of the majors on the day, up 0.31% against the Australian dollar and 0.19% versus sterling.
The Japanese Yen shows strength after October producer prices rose 7.1% YoY, significantly beating the 6.5% forecast and fueling Bank of Japan rate-hike expectations. Meanwhile, the US Dollar remains robust, with the DXY hitting an 18-month high of 103.08 as markets fully price in a December Federal Reserve rate hike.
The yen is outperforming other major currencies, but the dollar is also very strong on expectations the Fed will hike rates in December, so the pair pushes to fresh two-month highs near 159.94.
A daily close below the 20-day EMA at 158.34 would signal fading bullish control and open the door to a deeper pullback.
Markets now fully price a December Fed rate hike, and the midterm election result reduces expectations of political pressure on the Fed, supporting the dollar as shown by the DXY at 103.08, an 18-month high.
Hot producer price data at 7.1% YoY raised expectations of Bank of Japan rate hikes, so the yen outperforms its major peers even against a broadly strong dollar.