USD/JPY hovers around 151.70, US CPI data looms

The USD/JPY pair consolidates its recent losses during the Asian session on Tuesday. The pair trims losses after plunging nearly 70 pips in late Monday on the speculations about a potential intervention in FX markets by Japanese authorities. USD/JPY currently trades around 151.72, up 0.05% on the day.

On Tuesday, US Treasury Secretary Janet Yellen said that she disagrees with Moody's decision to move the US rating to a negative outlook while adding that she’s confident in the US economy and Treasuries as a safe-haven asset.

As Fed officials said additional tightening will depend on the data. Investors will take cues from the US inflation data on Tuesday. The US headline Consumer Price Index (CPI) is expected to grow by 0.1% MoM in October and the core inflation measure is estimated to remain at 0.3 MoM and 4.1% YoY. Furthermore, the New York Fed’s survey of consumer expectations showed the one-year and five-year inflation outlook eased to 3.57% and 2.72% respectively.

The stronger inflation data might convince the Fed to raise more rate hikes in its December or January meeting to bring the inflation back to the target. This, in turn, might lift the US Dollar (USD) and act as a tailwind for the USD/JPY pair.

On the Japanese Yen front, Japanese Finance Minister Sunichi Suzuki came with the verbal intervention on Monday by saying that it’s important for currencies to move stably reflecting fundamentals, and will continue to take all possible steps on FX moves. However, both Japanese Finance Minister Suzuki and Bank of Japan (BoJ) Deputy Governor Shinichi Uchida denied to comment on FX levels.

Apart from this, the director-general of the BoJ's monetary affairs department, Kazuhiro Masaki, said even with upward pressure on long-term interest rates, the BOJ does not believe the 10-year yield will significantly exceed 1%.

Market players will focus on the US Consumer Price Index (CPI) data due later on Tuesday. The attention will shift to the preliminary Japan’s Gross Domestic Product for the third quarter (Q3) on Wednesday. These events could give a clear direction to the USD/JPY pair.