- The Japanese Yen (JPY) is rising, extending gains from last week
- The BoJ is expected to hike rates by 25 bps
- The US Dollar (USD) falls against major peers
- US CPI and jobs data are due this week
The US dollar Japanese yen (USD/JPY) exchange rate is falling after gains last week. The pair rose 0.3% in the previous week, settling on Friday at 155.82. On Monday at 21.30 UTC, USD/JPY trades -0.56% at 154.95 and traded in a range of 154.74 to 155.99.
The end is rising at the start of the week, with attention firmly on the Bank of Japan’s rate decision on Friday. The Bank of Japan is widely expected to hike interest rates by 25 basis points to 0.75%, the highest level in over two decades, but still well below the inflation rate, which stands at 3%. If price growth accelerates, the BoJ could be forced to raise rates more quickly.
Bank of Japan guidance will be key to near-term direction, with a recent report suggesting less emphasis on the bank’s neutral-rate estimates. The Bank of Japan is likely to stick with its pledge to keep raising interest rates, but emphasise that the pace of increases will depend on the economy’s performance.
The US dollar is falling across the board. The US dollar index, which measures the USD against a basket of currencies, is down 0.11% to 98.29, after three consecutive weeks of losses.
The USD is falling at the start of the new week, dropping to its two-month low as markets await the release of a slew of economic data, including the delayed November nonfarm payrolls report and inflation figures.
The Bureau of Labour Statistics is set to release its long-awaited combined employment reports for October and November, following delays in data collection during the longest U.S. government shutdown in history. The data will help to give some closure on how the US labour market is holding up after the Fed rate cut last week.
The markets are pricing in a 75% probability of a rate hold at the January 28 meeting. However, significantly weaker-than-expected data could prompt a change in expectations.