The USD/JPY pair is seeing modest gains near 157.95 during early European trading on Tuesday, as traders await key US inflation data. The Bank of Japan (BoJ) has taken a hawkish stance, signaling a potential interest rate hike in December. One board member emphasized the need for a rate increase without unnecessary caution. However, the possibility of currency intervention by Japanese authorities could limit further gains for the US Dollar.
Japan’s Ministry of Finance revealed that the country conducted currency interventions on three days between July 30 and August 3, with the largest intervention totaling 7.98 trillion JPY ($50.36 billion) on July 30. This exceeded the previous record of 6.28 trillion JPY set on April 30. Analysts at Rabobank note that the Japanese Yen has been the second-best performing G10 currency this year, supported by significant FX interventions and strong wage data.
Traders are closely watching the US Consumer Price Index (CPI) inflation data, expected to show a 0.3% month-over-month rise in October, with the core CPI projected at 0.2%. Hotter-than-expected inflation could reinforce the Federal Reserve’s plans for a December rate hike, boosting the US Dollar. Meanwhile, Rabobank analysts predict that USD/JPY could edge lower to the 155.00 area over the next three months, citing BoJ tightening hopes and improving JGB market dynamics.
San Francisco Fed President Mary Daly delivered a hawkish speech, emphasizing that inflation remains the top priority despite solid jobs data. Her remarks, scored 8/10 on the FXS Speechtracker, signal a bias toward further rate hikes. The FXS Fed Sentiment Index rose to 143.10, reinforcing a hawkish Fed backdrop. Technical analysis shows USD/JPY holding below the 100-day SMA, with immediate resistance near 158.90 and support around 157.95.