Japanese yen strengthened on Thursday in response to a better PPI print from Japan.
The Japanese yen (JPY) continues its steady intraday advance against the US dollar, which, combined with increased US dollar (USD) selling, drives the USDJPY pair to levels below 154.00 heading into Thursday’s European session. The stronger Producer Price Index (PPI) reported by Japan earlier today supports speculations that the Bank of Japan (BoJ) will raise interest rates further, acting as a tailwind for the yen. Additionally, a fresh leg down in US Treasury bond yields appear to be another factor benefitting the lower-yielding JPY.
Worries over Trump’s trade tariffs may deter JPY bulls from putting new bets.
Concerns about the consequences of US President Donald Trump’s tariffs on steel and aluminum imports, as well as potential reciprocal duties, operate as a headwind for the Japanese yen. Furthermore, expectations that the Federal Reserve (Fed) would maintain its hawkish posture, supported by strong US consumer inflation data on Wednesday, could limit further losses for the dollar and the USDJPY pair. As a result, care should be exercised before planning for a significant USDJPY slide from the previous day’s one-week high.
Daily market Update:Japanese yen gains on intraday surge higher prompted by solid PPI print in Japan.
A preliminary study released this Thursday revealed that Japan’s Producer Price Index (PPI) increased 0.3% month on month in January and 4.2% year on year.
This alludes to symptoms of increasing inflationary pressures in Japan, which, together with recent wage growth figures, supports the argument for additional rate hikes by the Bank of Japan.
Furthermore, Bank of Japan Governor Kazuo Ueda and Deputy Governor Himino recently hinted at the likelihood of another rate hike if the economy and prices meet predictions.
The Japanese yen bulls appear hesitant on concerns that US President Donald Trump’s no-exemption tariffs on commodities imports may jeopardize Japan’s economic stability.
The US Bureau of Labor Statistics said on Wednesday that the headline US Consumer Price Index increased by 0.5% in January, the most since August 2023 and higher than estimated.
The annual rate rose to 3% from 2.9% in December, while the core CPI (excluding food and energy costs) increased 3.3% from a year ago, compared to 3.1% forecast.
The numbers highlight still-sticky inflation, which, combined with Friday’s mainly encouraging US employment data, suggests that the Federal Reserve will maintain its hawkish approach.
Fed Chair Jerome Powell stated that the central bank intends to keep monetary policy restrictive for the time being, as inflation, while lowering, remains over the 2% target.
The benchmark 10-year US government bond yield rose the most in one day since December on a strong US CPI reading, widening the US-Japan rate disparity.
Investors are looking forward to the US PPI print, which, together with the US Weekly Initial Jobless Claims may influence the US Dollar and drive the USDJPY pair.
