Japanese yen gains ground with the announcement of Tokyo’s CPI statistics on Friday.
The Japanese yen (JPY) edged higher after the Statistics Bureau of Japan announced the Tokyo Consumer Price Index (CPI) data on Friday.
The JPY downside may be limited as traders continue to unwind their carry positions ahead of the BoJ meeting.
The JPY gains support as traders may unwind their carry trades ahead of the Bank of Japan’s two-day policy meeting, which ends on Wednesday. During the meeting, the board will address the potential of boosting interest rates and define plans for tapering. It makes large bond acquisitions.
Masato Kanda, Japan’s senior currency ambassador, told the G20 on Friday that foreign exchange (FX) volatility hurts the Japanese economy. Kanda acknowledged a growing chance of a gentle landing and emphasized the importance of continuously monitoring the economy and implementing required measures, according to Reuters.
Recent US economic data have lessened rate cut predictions for September, which may limit the dollar’s downside.
The US Dollar may benefit from improved US economic data, which have decreased some rate drop forecasts for September. On Friday, the June Personal Consumption Expenditures (PCE) Price Index will be released.
On Thursday, the US GDP for the second quarter (Q2) was higher than projected. This comes after Wednesday’s US PMI report, which indicated a higher rise in private-sector activity for July, underlining the durability of US Despite higher interest rates, growth continues.
Daily Market Movers: Japanese Yen gains on inflation statistics.
The headline The Tokyo CPI rose by 2.2% year on year in July, slightly less than the prior 2.3% increase. The Tokyo CPI excluding Fresh Food and Energy increased by 1.5% year on year, compared to an earlier increase of 1.8%. Furthermore, the CPI excluding Fresh Food increased by 2.2% in July, meeting market forecasts.
The Federal Open Market Committee (FOMC) can “afford to wait” before making any modifications due to the United States’ solid economic growth. According to the bank, the economy “remains on robust footing” and that the Fed will begin decreasing rates in December.
According to the FedWatch Tool from CME Group, markets are now The chance of a 25-basis-point rate drop at the September Fed meeting is 88.6%, down from 94.0% the week before.
US GDP increased at annualized rate of 2.8%.
On Thursday, the US GDP increased at an annualized rate of 2.8%, adjusted for seasonality and inflation, up from the previous figure of 1.4% and beyond forecasts of 2%. In addition, initial jobless claims declined to 235K in the week ending July 19, compared to the prior reading of 243K and the projected 238K.
According to Reuters, Japanese Finance Minister Shunichi Suzuki, Chief Cabinet Secretary Yoshimasa Hayashi, and top currency diplomat Masato Kanda declined to comment on foreign exchange problems on Wednesday.
The Japanese Cabinet Office maintained its July economic assessment but warned of a dismal prognosis in its monthly report released on Thursday. The government also reduced its evaluation of exports, indicating that they remain stagnant.
In its mid-year assessment, the BlackRock Investment Institute stated that Japan’s economic recovery and increasing inflation make the country’s equity market one of its most confident investments. The business believes that the Bank of Japan will not raise interest rates at its meeting next week.
Toshimitsu Motegi, a prominent official in the ruling party, encouraged the Bank of Japan (BoJ) to more clearly express its goal to normalize monetary policy through gradual interest rate hikes, according to Reuters. Prime Minister Fumio Kishida also stated that adjusting the central bank’s monetary policy would help Japan’s shift to a growth-driven economy.
JP Morgan expects no rate hike from the Bank of Japan (BoJ) in July, or at any time in 2024. A July rate hike is not their base case, and they do not anticipate any increases for the rest of 2024. They believe it is too early to take a bullish attitude on the yen.
