- USD/JPY slumps to near 142.00 as the US Dollar corrects after the US PPI report release.
- The US headline and core PPI for August came in softer-than-expected.
- BoJ Tamura sees interest rates rising to at least 1%.
The USD/JPY pair falls sharply to near 142.00 in Thursday’s North American session. The asset declines as the US Dollar (USD) faces selling pressure after the release of the softer-than-expected United States (US) annual Producer Price Index (PPI) data for August.
The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, corrects to near 101.60.
The PPI report showed that the annual headline produce inflation grew by 1.7%, slower than estimates of 1.8% and the prior release of 2.1%, downwardly revised from 2.2%. The core PPI – which excludes volatile food and energy prices – rose steadily by 2.4%, at a slower pace than expectations of 2.5%. The impact of the US PPI data appears to be insignificant on market speculation for the Federal Reserve (Fed) interest rate cut path for next week’s policy meeting.
According to the CME FedWatch tool, the probability for the Fed reducing interest rates by 50 basis points (bps) to 4.75%-5.00% in September remains at 13% as they were before the US PPI data release.
Going forward, investors will focus on the preliminary Michigan Consumer Sentiment Index data for September, which will be published on Friday. The sentiment data is estimated to have remained almost steady at 68.0 from the prior release of 67.9.
On the Tokyo front, the Japanese Yen (JPY) strengthens as Bank of Japan (BoJ) policymaker Naoki Tamura delivers a hawkish interest rate guidance. Tamura sees interest rates rising to at least 1% by the early second half of 2025. Tamura refrained from providing a pre-set interest rate hike path.
Japanese Yen FAQs
The Japanese Yen (JPY) is one of the world’s most traded currencies. Its value is broadly determined by the performance of the Japanese economy, but more specifically by the Bank of Japan’s policy, the differential between Japanese and US bond yields, or risk sentiment among traders, among other factors.
One of the Bank of Japan’s mandates is currency control, so its moves are key for the Yen. The BoJ has directly intervened in currency markets sometimes, generally to lower the value of the Yen, although it refrains from doing it often due to political concerns of its main trading partners. The current BoJ ultra-loose monetary policy, based on massive stimulus to the economy, has caused the Yen to depreciate against its main currency peers. This process has exacerbated more recently due to an increasing policy divergence between the Bank of Japan and other main central banks, which have opted to increase interest rates sharply to fight decades-high levels of inflation.
The BoJ’s stance of sticking to ultra-loose monetary policy has led to a widening policy divergence with other central banks, particularly with the US Federal Reserve. This supports a widening of the differential between the 10-year US and Japanese bonds, which favors the US Dollar against the Japanese Yen.
The Japanese Yen is often seen as a safe-haven investment. This means that in times of market stress, investors are more likely to put their money in the Japanese currency due to its supposed reliability and stability. Turbulent times are likely to strengthen the Yen’s value against other currencies seen as more risky to invest in.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD holds above 1.1000 following ECB policy announcements
EUR/USD trades modestly higher on the day above 1.1000 on Thursday as the US Dollar struggles to find demand after August producer inflation data. Meanwhile, the ECB lowered the benchmark interest rate by 25 bps as expected.
GBP/USD trades above 1.3050 as USD loses strength
GBP/USD stays in positive territory above 1.3050 in the American session on Thursday. The improving risk mood and the lower-than-forecast annual PPI reading for August from the US weigh on the USD, helping the pair edge higher.
Gold retains gains near fresh record highs
Gold maintains its bullish bias amidst the mild pullback in the Greenback and trades at a new record high at around $2,550. The data from the US showed that the annual producer inflation declined to 1.7% in August from 2.1% in July.
Crypto Today: Bitcoin, Ethereum gain between 1% and 2% on Thursday, XRP back above $0.53
BTC is back above $58,000 and ETH hovers around $2,363 at the time of writing. XRP is back above $0.5369 on September 12, gains slightly on the day.
European Central Bank widely expected to cut interest rates in September
The European Central Bank is expected to cut key rates by 25 bps at the September policy meeting. ECB President Christine Lagarde’s presser and updated economic forecasts will be closely scrutinized for fresh policy cues.
Moneta Markets review 2024: All you need to know
VERIFIED In this review, the FXStreet team provides an independent and thorough analysis based on direct testing and real experiences with Moneta Markets – an excellent broker for novice to intermediate forex traders who want to broaden their knowledge base.