Yen Strengthens as Dollar's Inflation Bounce Fades
The Japanese Yen has strengthened against the US Dollar following the release of US inflation data. The Consumer Price Index (CPI) held steady at 3.4% year on year in August, matching July's reading and market expectations.
The initial reaction to the data was a brief spike for the Greenback above 154.50, but this move quickly faded as Yen strength took over. The pair is now back near the lower end of its recent range, having fallen sharply from mid-155s earlier in the week.
The US Dollar's inflation-day support has drained away, and markets see the central bank raising interest rates next week with a 25-basis-point hike to 1.25% on the table. This move would lift Japanese borrowing costs to their highest level in over three decades, weighing further on the Greenback.
The technical analysis shows that USD/JPY remains under pressure around the low-153s, with the Relative Strength Index (RSI) at 29.35 just inside oversold territory. Bounces are likely to be treated as corrective while the pair remains under key moving-average barriers.