Japanese Yen Weakens After Softer Tokyo CPI Data
The USD/JPY exchange rate attracted new buyers on Tuesday following the release of lower-than-expected Tokyo CPI data. The data lowered expectations for a Bank of Japan (BoJ) interest rate hike and weakened the Japanese Yen amid global economic concerns. A stronger US dollar, driven by hawkish expectations from the Federal Reserve, further supported the currency pair. After rebounding the previous day from the 159.35-159.30 area, USD/JPY continued its modest rise in the Asian session, although it stalled near the psychological 160.00 level.
A government report released today showed that the Consumer Price Index (CPI) in Tokyo, the Japanese capital, slowed to 1.4% in March from 1.5% last month, registering the lowest increase since March 2022. Furthermore, the core CPI, which excludes fresh food prices, rose 1.7% in the reported month, compared to 1.8% in February. Core CPI, which excludes fresh food and energy prices, rose 2.3% in March, down from 2.5% in the previous month. This data eased expectations of an imminent interest rate hike by the Bank of Japan (BoJ), particularly amid economic concerns stemming from the war in Iran, which further weakened the Japanese yen.
This, coupled with a stronger USD, provided support for the USD/JPY pair. Markets have now completely discounted the possibility of a rate cut by the US Federal Reserve, with bets rapidly increasing for a rate hike later this year, due to the surge in inflation fueled by the war. This pushed the USD to its highest level so far this year.
Meanwhile, Japan's Vice Finance Minister for International Affairs, Atsushi Mimura, signaled a strong stance on Monday, stating that authorities are prepared to take decisive action if speculative movements in the foreign exchange market continue. BoJ Governor Kazuo Ueda also stated that the central bank will closely monitor exchange rate movements, fueling speculation that authorities will intervene to curb the weakening of the domestic currency. This discouraged market participants from placing new bets on the Japanese Yen and limited further gains in the USD/JPY pair. (asd)
Source: Newsmaker.id
