- The Japanese Yen (JPY) falls from a three-week high
- BoJ could hike rates sooner
- The US Dollar (USD) rebounds against major peers
- US PPI jumps 0.9% MoM its largest rise in 3 years
The US dollar Japanese yen (USD/JPY) exchange rate is rising, recovering from a three-week low. The pair fell 0.49% in the previous session, settling on Wednesday at 147.87. At 21:30 UTC, USD/JPY is trading -0.3% higher at 147.88 and trades in a range of 146.22 to 147.96.
The Japanese yen lost ground against the US dollar on Thursday, snapping a 2-day winning run, as USD strength followed the latest inflation data.
The Bank of Japan, meanwhile, is under increasing scrutiny over how it gauges inflation. The latest CPI report stood at 3.3% year on year in June, well above the 2% target, yet the Bank of Japan continues to rely on underlying measures which focus on demand and wage growth. U.S. Treasury Secretary Scott Bessent said the Bank of Japan is behind the curve and will likely raise rates soon.
His comments amplify expectations of a possible policy shift as soon as October if inflation remains elevated. Attention is now turning to tomorrow’s GDP data, which is expected to show a modest 0.1% quarter-on-quarter expansion after stagnating in the prior quarter.
The US dollar is falling across the board. The US dollar index, which measures the USD against a basket of peers, is rising 0.42% to 98.25, snapping a two-day losing streak.
The U.S. dollar is pushing higher after US wholesale inflation came in hotter than expected, with services prices soaring. US PPI, which measures inflation at the factory gate level, rose by the most in three years in July, suggesting a broad pickup in inflation was imminent, posing A dilemma for the Federal Reserve.
US PPI rose 0.9% month on month in July, well above the 0.2% forecast, marking the largest gain since June 2022.
The data validates the Federal Reserve’s wait-and-see position, even after CPI inflation remained unchanged at 2.7% annually earlier this week. The market is still pricing in a September rate cut by the Fed. However, the probability has eased back to 96% from 100%.
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