JPY Gains as BoJ Tightening Expectations Rise

Scotiabank strategists Shaun Osborne and Eric Theoret see Japan's July Consumer Price Index (CPI) data as supporting expectations for Bank of Japan (BoJ) tightening, with a 20bps hike reflected in swaps. The resulting Japanese Yen strength has led to a modest decline in USD/JPY.

The CPI rose to 1.9% in the year, matching forecasts and extending the steady price increase seen since February.

Preliminary August Purchasing Managers' Index (PMI) data also reported stronger-than-expected results, indicating firm momentum in services and manufacturing.

This inflation data added to conviction that the BoJ will tighten next month. As a result, the JPY gained 0.4% against a soft USD on the day.