- The Japanese Yen (JPY) slumps further on Wednesday
- Japanese household spending rose 2.3% YoY
- The US Dollar (USD) rises versus its major peers
- FOMC pointed to two more rate cuts but noted inflation could deter plans
The US dollar Japanese yen (USD/JPY) exchange rate rose for a fifth straight day on Wednesday. The pair rose 1.13% in the previous session, settling on Tuesday at 152.06. On Wednesday at 21:30 UTC, USD/JPY trades +0.40% at 152.67 and traded in a range of 152.07 to 153.00.
The Japanese yen weakened to its lowest level since mid-February against the US dollar on Wednesday, amid growing concerns about an increase in Japan’s fiscal spending.
The surprise leadership election win by Sunae Takaichi to the ruling Liberal Democrat party dampened BoJ rate hike expectations, whilst lifting forecasts of greater government stimulus.
The U.S. dollar is rising as it continues to benefit from weakness in the euro and the Japanese yen owing to political situations in those countries.
Takaichi is expected to pursue an expansionary fiscal policy, similar to that adopted by former Japanese Prime Minister Shinzo Abe, who implemented an expansive policy to stimulate growth after 2012.
On the data front, Japanese household spending rose by more than expected in August, demonstrating consumer resilience despite persistent inflation.
Japan’s household spending, adjusted for inflation, rose 2.3% from a year ago in August, surpassing the 1.2% forecast and marking a fourth consecutive monthly increase.
The data suggests that consumers are becoming accustomed to inflation to some extent as high prices persist.
The US Dollar is rising across the board. The US Dollar Index, which measures the greenback against a basket of major currencies, trades +0.28% at 98.86—marking the third day of gains.
The U.S. dollar is rising as it continues to benefit from the weakness of the euro and the Japanese yen, owing to the political situations in those countries.
Whilst the US government shutdown continues, data points are few and far between.
Attention was on the FOMC minutes, which showed that Fed officials expect another two interest rate cuts this year, with the job market remaining the predominant concern.
However, the minutes will note that there was some caution regarding inflation, which remains above the Fed’s target of an annual rate of over 2%.
Fed policymakers indicated that higher-than-expected inflation could determine further rate cuts.
Attention will turn to Federal Reserve chair Jerome Powell, who is due to speak tomorrow and could provide further insight into the Fed’s path for rate cuts.