- The Japanese Yen (JPY) is modestly high, adding to yesterday’s gains
- Political uncertainty and BoJ rate hikes in balance
- The US Dollar (USD) is falling versus its major peers
- US PPI inflation was cooler than expected
The US dollar Japanese yen (USD/JPY) exchange rate is falling for a third straight day. The pair fell -0.09% in the previous session, settling on Tuesday at 147.39. On Monday at 16:30 UTC, USD/JPY trades -0.04% higher at 147.41 and trades in a range of 147.12 to 147.65.
The Japanese yen is struggling for direction amid mixed fundamental cues. On the one hand, expectations of political uncertainty could give the BoJ reason to go slow on further rate hikes. Prime Minister Ishiba resigned over the weekend.
However, investors are reluctant to bet against the yen amid growing acceptance that the BoJ will stick to its path for policy normalisation. This is in contrast to the Federal Reserve, which is expected to cut rates across the rest of the year. This BoJ–Fed divergence is beneficial for the yen.
The US dollar is falling across the board. The US dollar index, which measures the USD against a basket of peers, is falling 0.12% on Wednesday after gains yesterday.
The U.S. dollar is falling, with expected wholesale inflation, which has added to evidence that the Federal Reserve will cut interest rates next week. USPPI fell 0.1% month on month in August, marking its first drop since April. On an annual basis, PPI eased to 2.6%, below the 3.3% forecast. The data prompted President Trump to renew calls for lower interest rates.
The market is fully pricing in a 25 basis point rate cut by the Federal Reserve next week, and some even see a 50 basis point cut following clear signs of weakness in the US jobs market.
Attention is now turning to tomorrow’s CPI inflation report, which is expected to show inflation ticked higher to 2.9% year on year. However, a cooler-than-expected CPI could dampen expectations of an outsized cut by the Fed on September 17th.