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Yen trims gains vs dollar after US CPI keeps Fed-hike odds in check
USD/JPY was around 159.20 after testing 158.58, and September Fed hike probability fell to 38% from 44% ahead of Thursday PPI data.
The Japanese yen pared some of its gains against the US dollar on Wednesday after US CPI came in line and did not spark a major reaction in currency markets, according to FXStreet. At the time of writing, USD/JPY was trading around 159.20 after an intraday low of 158.58.
US CPI rose 0.1% in July, reversing June’s 0.4% decline, while annual inflation eased to 3.4% from 3.5%. Core CPI increased 0.2% month over month after being flat in June, and the annual core rate slowed to 2.5% from 2.6%.
Following the release, traders reduced expectations for a September Fed rate hike, with the CME FedWatch Tool placing the probability at 38% versus 44% before the CPI report. US Treasury yields edged lower across the curve as the dollar recovered from its post-CPI dip, FXStreet said.
FXStreet also noted that while inflation remains above target and elevated oil prices could complicate the Fed’s path, limited prospects for peace in the Middle East are providing some support for the dollar. On the yen front, the currency has already given back nearly half of gains tied to a recent joint US-Japan intervention, and both sides have indicated they are prepared to act again, as traders look ahead to Japan and US producer price index data due Thursday.
Latest closeUSD/JPY 159.29 ▲0.9%