BoJ Rate Hike Buoys Japanese Yen Against US Dollar

The Japanese Yen has strengthened against the US Dollar due to Tokyo's core Consumer Price Index (CPI) inflation data, which suggests a potential rate hike by the Bank of Japan (BoJ) in September.

Data released on Friday showed that the headline Tokyo CPI rose 1.9% year-over-year (YoY) in August, compared to 1.8% in July. The core CPI inflation climbed to 1.8% YoY in August from 1.7% in July. Additionally, CPI excluding food and energy, closely watched by the BoJ as a gauge of trend inflation, jumped 2.0% YoY in August.

This data has reinforced expectations that the Japanese central bank may raise interest rates as early as its September 17-18 policy meeting, providing some support to the JPY and acting as a headwind for the pair.