Japanese Yen falls as US CPI beats forecasts and Fed officials back further rate hikes

Source Fxstreet
  • USD/JPY climbs as stronger-than-expected US inflation lifts the US Dollar.
  • Dallas Fed President Logan calls for at least two more rate hikes.
  • The wide US-Japan yield gap continues to weigh on the Yen.

USD/JPY strengthens on Tuesday as stronger-than-expected US inflation and hawkish remarks from Federal Reserve (Fed) officials lift demand for the US Dollar (USD). At the time of writing, the pair trades around 158.76, up 0.55% on the day.

The US Consumer Price Index (CPI) rose 0.4% MoM in October, above the 0.3% forecast but down from 0.6% in September. Core CPI, which excludes food and energy, rose 0.3%, matching September’s pace and beating the 0.2% forecast. The Bureau of Labor Statistics (BLS) did not publish annual figures for October because of last year’s government shutdown.

The US Dollar Index (DXY) climbs 0.68% to around 102.38, while the benchmark 10-year US Treasury yield rises 12 basis points to reclaim 5.00%.

Dallas Fed President Lorie Logan said the Fed needs “at least two more 25-basis-point (bps) rate increases” and that it “may be possible to move more rapidly this winter.” She said the policy rate is at least 50 basis points below a modestly restrictive level and pointed to inflation pressures beyond wartime energy disruptions.

Before the release, Fed Governor Christopher Waller said a half-point rate hike may be needed in December if October core CPI comes in “around 0.3% or higher.” Traders now assign an 89.2% chance to a 25-bps hike and a 10.8% chance to a 50-bps hike, according to the CME FedWatch Tool.

Meanwhile, the Bank of Japan (BoJ) remains on a gradual rate-hiking path, with its policy rate at 1.25%. The 10-year Japanese government bond yield sits near 2.17%, roughly 283 basis points below its US counterpart. Higher US yields and a firmer US Dollar weigh on the Japanese Yen, while the prospect of further Fed hikes could keep the gap between US and Japanese interest rates wide.

With a light Japanese economic calendar for the rest of the week, USD/JPY traders will focus on remarks from Fed officials and producer price data from Japan on Thursday and the US on Friday.

US Dollar Price Today

The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the strongest against the Australian Dollar.

USD EUR GBP JPY CAD AUD NZD CHF
USD 0.63% 0.88% 0.56% 0.52% 1.11% 0.75% 0.88%
EUR -0.63% 0.23% -0.09% -0.10% 0.47% 0.12% 0.24%
GBP -0.88% -0.23% -0.34% -0.33% 0.24% -0.12% 0.00%
JPY -0.56% 0.09% 0.34% -0.02% 0.56% 0.19% 0.32%
CAD -0.52% 0.10% 0.33% 0.02% 0.58% 0.21% 0.34%
AUD -1.11% -0.47% -0.24% -0.56% -0.58% -0.36% -0.24%
NZD -0.75% -0.12% 0.12% -0.19% -0.21% 0.36% 0.13%
CHF -0.88% -0.24% -0.01% -0.32% -0.34% 0.24% -0.13%

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).

Disclaimer: For information purposes only. Past performance is not indicative of future results.
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