Dollar Rebound Fades as Yen Strengthens on BoJ Rate Hike Expectations

The Japanese Yen strengthened against the US Dollar on Friday after inflation data from the United States came in line with expectations. The Consumer Price Index (CPI) rose 3.4% year-over-year in August, unchanged from the previous month.

While core inflation, which excludes food and energy prices, increased more than expected at 0.3% on a monthly basis, annual core inflation eased to 2.4% from 2.5% in July.

The initial reaction to the data was a brief jump in the US Dollar, but this quickly gave way to selling as strength in the Japanese Yen outweighed the dollar's gains.

Markets are looking ahead to next week's Bank of Japan decision, where an expected 25-basis-point rate hike would bring borrowing costs to their highest level in 31 years.