- The Japanese Yen (JPY) is rising after two days of losses
- Japan’s policymaker Kono encourages the BoJ to hike soon
- The US Dollar (USD) is unchanged against major peers
- Investors await the Jackson Hole Symposium
The US dollar Japanese yen (USD/JPY) exchange rate is falling, giving back yesterday’s gains. The pair rose 0.47% in the previous session, settling on Monday at 147.92. On Tuesday at 19:00 UTC USD/JPY trades -0.29% lower at 147.49 and traded in a range of 146.45 to 148.11.
The yen is gaining ground after Japan’s policymakers Taro Kono is urging the Bank of Japan to raise interest rates and show more fiscal restraint, in an attempt to stop the yen slide and cool inflation.
Japanese inflation has remained above 3% every month this year, which is well above the BOJ’s 2% target, whilst food inflation has topped 6%. The latest inflation data will be released later this week.
The Bank of Japan may find itself scrambling to play catch-up if it waits too long to hike interest rates again.
The US dollar is falling against the yen but is unchanged versus its major peers. The US dollar index, which measures the USD against a basket of peers, is unchanged at 98.21, after strong gains yesterday.
The US dollar is broadly unchanged versus its major peers as investors look ahead to the Federal Reserve Jackson Hole economic policy symposium later this week. A speech by Federal Reserve chair Jerome Powell on Friday will be the main focus amid a quiet week for major economic data.
With traders pricing in an 85% probability of a 25 basis point rate cut in the September meeting, the market will be watching to see whether Powell adopts a more dovish tone.
The Fed left interest rates unchanged in the July meeting, and Powell adopted a slightly more hawkish stance in the press conference, saying he is reluctant to cut rates amid expectations that inflation will increase across the summer.
The latest CPI data was weaker than expected; however, PPI inflation was significantly stronger than forecast.
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