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USD/JPY holds near four-decade highs as oil lifts Fed-rate focus

CME FedWatch pricing shows about a 73% chance of a December rate hike, supporting the US dollar and weighing on the yen.

Reported · Written up by our desk · Major Pairs

USD/JPY was little changed on Friday, trading near four-decade highs as the yen struggled to find demand, with market commentary pointing to higher oil prices and a wide US-Japan interest-rate gap.

FXStreet notes the yen received brief support after Japan’s Prime Minister Sanae Takaichi echoed Finance Minister Satsuki Katayama’s call for households and pension funds to increase investment in Japanese financial assets. Analysts at BBH said Japan is a large net creditor, with net foreign assets of roughly $3.6 trillion in the first quarter, about 83% of GDP.

Attention remains on rising Middle East tensions that have pushed oil prices higher and revived inflation concerns. With energy costs increasing Japan’s import bill and oil keeping hawkish Fed expectations intact, the US dollar regained footing after softer-than-expected US inflation data earlier this week.

According to the CME FedWatch Tool, markets are pricing around a 73% chance that the Fed will raise interest rates by December. The US Dollar Index was roughly flat around 100.75 after hitting a more than three-week low of 100.35 on Wednesday, while Cleveland Fed President Beth Hammack said inflation is too high and cited a core PCE inflation nowcast of 3.3%.

Latest closeUSD/JPY 162.33 ▲0.2%|Dollar index 100.71 ▲0.2%

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