USD/JPY Rebounds from Lows as Inflation Expectations Rise and Bank of Japan Policy Hinges on Future Rate Hikes
The USD/JPY pair has rebounded from recent lows, but its upside potential is capped by risks of a Bank of Japan rate hike.
Rising U.S. inflation has strengthened expectations for interest rate hikes, with the August Consumer Price Index continuing to rise and core inflation posting a more pronounced increase.
According to CME FedWatch data, the market's pricing of a 25-basis-point rate hike at the September policy meeting briefly climbed to around 92.4%, a marked increase from roughly 60% a week earlier.
The Bank of Japan is expected to announce its September interest-rate decision this Friday, with markets closely watching whether it will further raise policy rates and whether Kazuo Ueda will provide clearer signals on the pace of future rate hikes.