USD/JPY tests the 160.00 level as the interest rate gap between the Fed and the Bank of Japan remains a primary driver, with markets awaiting US PPI data and further Fed commentary.
October CPI beat forecasts with a 0.4% rise, Fed Governor Waller called a hike at the December 8-9 meeting likely, and futures price a quarter-point move near 90%. With the Fed rate at 3.75%-4.00% versus the BoJ's 1.25%, the rate gap continues to pay holders of Dollars over Yen, and the pair has broken above its seven-week 156.00-159.00 range to near 160.00. However, the last two times above 160.00 it fell more than five Yen within a week, which argues against chasing at these levels.
The USD/JPY pair has broken out of its seven-week 156.00-159.00 range, trading near 160.00 for the first time since September 2. The move follows a 0.4% rise in October CPI and comments from Fed Governor Waller suggesting a likely rate hike at the December 8-9 meeting, with futures pricing a quarter-point increase at 90%.
The Fed's rate of 3.75%-4.00% is at least two and a half points above the Bank of Japan's 1.25%, and an October CPI beat plus a likely Fed hike on December 8-9 keep that gap in place, which pays holders of Dollars over Yen.
Possibly: a BoJ hike to 1.50% is widely expected at the December 17-18 meeting, and when USD/JPY last traded above 160.00 it fell more than five Yen within a week both times.