Yen Holds Near 7-Month High

The Japanese yen strengthened slightly below 158 per dollar on Friday, trimming recent losses after data showed Tokyo’s core inflation accelerated to 2.7% in September, exceeding the Bank of Japan’s 2% target for the first time in nine months. However, a summary of opinions from the central bank’s September meeting offered fewer hawkish signals than investors had anticipated. The summary showed the central bank shifting its focus toward preventing inflation from exceeding its target, pointing to another rate increase this year, but provided little clarity on the timing. The yen also remained on track for a third consecutive weekly decline, pressured by a stronger dollar and elevated Treasury yields amid expectations that the Federal Reserve may need to raise interest rates further to contain energy-driven inflation. This points to the possibility of wider US-Japan interest-rate differentials, as the Fed’s tightening cycle has continued to move ahead of the BOJ’s rate hikes.

The Japanese yen weakened past 158 per dollar on Thursday, moving toward one-month lows as the summary of opinions from the Bank of Japan’s September meeting fell short of investors’ expectations for stronger hawkish signals from policymakers. The summary showed the central bank shifting its focus toward preventing inflation from exceeding its target, pointing to another rate increase this year, but provided little clarity on the timing ahead of policy meetings in October and December. The yen also faced pressure from a stronger dollar and elevated Treasury yields amid expectations that the Federal Reserve may need to raise interest rates further to contain energy-driven inflation. This supports the prospect of wider US-Japan interest-rate differentials, as the Fed’s tightening cycle continued to outpace the BOJ’s rate hikes.

The Japanese yen weakened past 158 per dollar on Thursday, reversing recent gains as the dollar and Treasury yields continued to rise amid expectations that the Federal Reserve may need to raise interest rates further to contain energy-driven inflation. The Japanese currency also remained under pressure from wide US-Japan interest-rate differentials, as expectations for further Fed tightening continued to outweigh the Bank of Japan’s rate hikes. However, softer-than-expected US PCE inflation data prompted traders to reduce bets on a Fed rate hike in October. In Japan, a summary of opinions from the BOJ’s September meeting showed that policymakers saw a need to accelerate the pace of rate hikes or bring them closer to the central bank’s target in the near term. Meanwhile, traders remain alert to the possibility of currency intervention as Japanese authorities have stepped up verbal warnings in recent sessions.