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Yen gains on inflation data as markets weigh more BoJ tightening

USD/JPY was around 158.85, after rebounding from 158.00, with the dollar near its lowest level since mid-May.

Reported · Written up by our desk · Major Pairs

USD/JPY traded around 158.85 on Friday, edging lower after a rebound from the 158.00 area the prior day, as Japan’s yen found support from fresh inflation readings that bolster expectations for additional Bank of Japan tightening.

FXStreet said Japan’s core Consumer Price Index, excluding fresh food, rose 1.8% year over year in July, after 1.6% in June. The CPI excluding both fresh food and energy also increased to 1.8%, from 1.7% previously, marking the fastest pace since January.

The report added that higher expected Japanese interest rates support the yen, though a still-large interest rate gap between the United States and Japan could cap upside moves. On the US side, the US Dollar Index remained close to its lowest level since May 14, while investors trimmed expectations for immediate Fed tightening.

FXStreet also pointed to US economic activity as a counterweight, noting the preliminary S&P Global Composite PMI rose to 56 in August from 54.5 in July, driven mainly by services. The resilience of private-sector growth was framed as a reason the dollar may face less downside even as inflation keeps some risk of another Fed rate hike later this year.

Latest closeUSD/JPY 159.31 ▼0.1%|Dollar index 99.64 ▼0.3%

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