Japanese Yen Soars as US Inflation Data Weighs on Fed Hike Odds

The Japanese Yen strengthened against the US Dollar after softer-than-expected inflation data from the United States. The USD/JPY pair dipped below 156.50 following the release, but closed near 157.50.

This development led to a decrease in the odds of an October Federal Reserve rate hike, with markets now giving it around a 35% chance. The Bank of Japan's policy rate is currently at 1.25%, which is more than 2.5 points below the Fed's range of 3.75-4.00%.

Tokyo core inflation data is due on Thursday, with forecasts suggesting it will reach 2.4%. A strong reading could lift the odds for a Bank of Japan rate hike, which would likely see the USD/JPY pair strengthen.