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USD/JPY holds near two-week high as traders await US CPI
The yen’s weakness is linked to Japan’s widening rate gap versus other economies and renewed risks to Japanese fiscal conditions, while Fed tightening odds are elevated ahead of CPI.
The USD/JPY pair is trading near a one-and-a-half-week high, with bulls looking to extend gains beyond the mid-159.00s as the US dollar finds support ahead of key US inflation data, according to FXStreet.
FXStreet said the initial jump in USD/JPY tied to the first US Japan joint intervention since 1998 has faded, with the wide rate gap keeping the yen carry trade active. It added that Japan’s aggressive stimulus and tax cuts have raised concerns about a worsening fiscal outlook, while ongoing energy disruptions tied to the Iran war continue to pressure the Japanese yen.
On the data front, Reuters Tankan showed Japanese manufacturers’ sentiment climbed from 13 in the prior month to 18 in August, with the non-manufacturers gauge rising to 28 from 25 in July. FXStreet also noted traders are pricing a 66% chance of a Bank of Japan rate hike in September based on Tokyo Tanshi data, though it did not appear to strengthen the yen materially.
For the US side, FXStreet cited expectations that higher oil prices could revive inflation pressures and push the Federal Reserve toward a more hawkish stance. Using CME Group’s FedWatch Tool, it said traders assign more than a 75% chance the Fed raises borrowing costs at least once by the end of 2026, while near term direction depends on the US CPI report due later today and the US PPI on Thursday.
Latest closeUSD/JPY 159.29 ▲0.9%