The US Dollar strengthened as October CPI data beat forecasts, pushing the 10-year Treasury yield to 5.00% and fueling expectations for further Federal Reserve rate hikes.
October US CPI beat forecasts (0.4% MoM headline vs 0.3% expected, 0.3% core vs 0.2% expected) and Fed officials back more hikes, with traders pricing an 89.2% chance of a 25-bps hike. With the BoJ policy rate at 1.25% and the 10-year yield gap near 283 bps, wider US-Japan rate differentials support further yen weakness. The pair already trades around 158.76, up 0.55%.
The hot October CPI print (0.4% MoM vs 0.3% forecast) and Fed officials backing further hikes pushed the Dollar Index up 0.68% to around 102.38, with the dollar strongest against the Australian Dollar (-1.11%). Expectations of an 89.2% chance of a 25-bps December hike support the currency.
The inflation beat and hawkish Fed commentary (Logan's call for at least two more 25-bps hikes) pushed the benchmark 10-year yield up 12 basis points to reclaim 5.00%. A higher-for-longer Fed rate path directly lifts yields, with Japan's 10-year yield sitting roughly 283 bps below.
The US Dollar climbed against the Japanese Yen on Tuesday, rising 0.55% to 158.76 after October CPI data exceeded expectations. Headline inflation rose 0.4% MoM, while core CPI hit 0.3%, prompting Fed officials to signal further rate hikes. Consequently, the 10-year US Treasury yield reclaimed the 5.00% level, widening the interest rate differential against Japan to approximately 283 basis points.
Stronger-than-expected US inflation and hawkish Fed comments lifted the dollar: USD/JPY rose about 0.55% to around 158.76, and the 10-year US yield climbed 12 basis points to 5.00%, keeping the gap with Japanese yields wide.
Fed officials' remarks plus producer price data from Japan on Thursday and from the US on Friday, as the Japanese calendar is otherwise light for the rest of the week.
It rose against all majors in the heat map, gaining 0.63% vs EUR, 0.88% vs GBP and 0.56% vs JPY, and was strongest against the Australian Dollar at 1.11%.
October CPI beat forecasts and Fed officials backed further rate hikes, lifting the 10-year yield 12 basis points back above 5.00%.