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Yen slips as traders cut bets on a September Fed hike

Soft US PPI data kept September Fed hike odds around 32%, while USD/JPY traded near 159.4 after briefly pushing toward 159 following the release.

Reported · Written up by our desk · Major Pairs

The Japanese yen struggled to gain traction versus the US dollar on Thursday as the dollar weakened modestly after softer-than-expected US producer price inflation data. The yen strengthened immediately after the release, briefly lifting USD/JPY toward 159, but the pair later traded around 159.37. The US Dollar Index (DXY) eased to about 99.90, retreating from 100.08, its highest level in two weeks. US Bureau of Labor Statistics data showed headline PPI was unchanged in July after a 0.1% decline in June, with the annual rate slowing to 4.7% from 5.5%. Core PPI rose 0.2% month-on-month, easing from 0.4%, and its yearly rate declined to 4.2% from 4.7%.

The broader run of softer inflation readings has led traders to scale back expectations for an imminent Federal Reserve rate increase. According to the CME FedWatch Tool, markets assign about a 32% probability to a September rate hike, down from 55% a week earlier.

While the front end of the US rates curve fell more sharply on the repricing, the move was less pronounced further out as higher energy prices keep inflation risks skewed upward. USD/JPY remained supported within its recent range, with expectations for a possible September Bank of Japan rate hike limiting upside, and the prospect of additional Japanese FX intervention capping gains near 160.00, according to FXStreet.

Latest closeUSD/JPY 159.42 ▲0.2%|Dollar index 99.99 ▲0.2%

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