Japanese yen struggles to attract buyers in the face of conflicting Tokyo consumer inflation data.
Japanese yen (JPY) fluctuated between mild gains and slight losses against the US dollar throughout the Asian session on Friday, owing to contradictory underlying clues. A dip in Tokyo’s core inflation rate below the Bank of Japan’s (BoJ) 2% objective dampens chances for further rate hikes in 2024 and weighs on the JPY. Aside from that, a generally favorable risk tone is perceived as another element reducing the JPY’s safe-haven demand.
However, the recent rhetorical intervention by Japanese authorities has deterred traders from placing strong negative wagers on the JPY ahead of Japan’s general election on Sunday.
USD halts its overnight decline from a multi-month high, providing support to USDJPY.
US Dollar (USD) halts the previous day’s retracement decline from a three-month high on bets expecting lower rate reduction by the Federal Reserve. This, in turn, helps the Jaoanese yen(USDJPY) pair maintain its neck above the mid-151.00s, as traders look to US macro data for short-term possibilities.
Daily Market Movers: Japanese Yen bulls remain on the sidelines amid uncertainty over the BoJ rate hike.
The Statistics Bureau of Japan revealed on Friday that the headline Tokyo Consumer Price Index (CPI) climbed by 1.8% YoY. In October, compared to 2.2% the previous month.
Further details indicated that Core CPI, which excludes volatile fresh food prices, rose 1.8% in October, down from 2% the previous month but somewhat higher than market estimates of 1.7%.
The core reading, which includes fresh food and energy costs, increased from 1.6% in September to 1.8% in the reported month, remaining below the Bank of Japan’s 2% objective.
This follows a private-sector poll released on Thursday, which revealed that business activity in Japan’s manufacturing and services sectors dropped in October, indicating dismal economic conditions.
This adds to the election-related uncertainty in Japan and increases questions about the BoJ’s capacity to raise interest rates further this year, and perceived as impacting on the Japanese Yen on Friday.
Japan’s Economy Minister, Ryosei Akazawa, stated that currencies must fluctuate in a stable manner that reflects fundamentals, and that a weak yen has a variety of effects on the economy.
The US dollar halts the previous day’s decline from a three-month high amid expectations of a less aggressive policy easing by the Federal Reserve, providing support for the Japanese yen (USDJPY) pair.
Friday’s US macro data, Durable Goods Orders and the revised Michigan Consumer Sentiment Index, may provide some impetus as investors anticipate Japan’s election on Sunday.
