Yen Rises as BoJ Tightening Bets Weigh on USD/JPY Ahead of Key Inflation Data
The yen has gained ground against the US dollar as markets speculate about the Bank of Japan's tightening policy, which could lead to a higher interest rate for the first time in nearly 31 years. The USD/JPY pair fell by 0.39% on Wednesday, reaching around 153.40. Analysts believe that demand for the yen has increased due to expectations of tighter BoJ policy, with a 25-basis-point move at the September meeting expected to lift the policy rate from 1% to 1.25%. This would be the highest interest rate since 1995.
The upcoming US inflation data releases, including the Producer Price Index and Consumer Price Index, are also being closely watched as they will inform expectations ahead of the Federal Reserve's September meeting. Markets currently assign a roughly 62% chance of a Fed rate hike according to the CME FedWatch Tool.