Yen moves towards two-week trough amid negative pressures

The Japanese yen declined in the Asian market on Wednesday against a basket of major and minor currencies, resuming losses that had temporarily paused yesterday against the US dollar, and is on the verge of touching its lowest level in two weeks, amid negative pressure, particularly from the currently weak prospects for the Bank of Japan to raise Japanese interest rates in September.

The US dollar rebounded as markets digested key US inflation data, awaiting further solid evidence regarding the likelihood of Federal Reserve rate cuts in September and October.

Price Overview

•Today’s yen exchange rate: The US dollar rose against the yen by 0.2% to ¥148.17, from today’s opening price of ¥147.84, recording its lowest level at ¥147.70.

•The yen ended yesterday’s session up 0.2% against the dollar, its first gain in the last three days, after earlier hitting a two-week low at ¥148.52.

•Aside from buying at lower levels, the yen rose after the release of US headline inflation data for July that came in below expectations.

Japanese Interest Rates

•Minutes from the Bank of Japan’s June monetary policy meeting showed that some board members said the central bank would consider resuming interest rate hikes if trade tensions eased.

•Recently released inflation and wage data showed declining inflationary pressures on Japanese central bank policymakers.

•Market pricing for a quarter-point interest rate hike at the September meeting remains below 40%.

•To reprice these expectations, investors are awaiting further data on inflation, unemployment, and wages in Japan.

US Dollar

The US Dollar Index rose by about 0.1% on Wednesday, in an attempt to recover from a two-week low of 97.90 points, reflecting a rebound in the greenback against a basket of global currencies.

Aside from buying at lower levels, the dollar’s rebound came as trade tension concerns between the US and China eased, in addition to digesting Tuesday’s US inflation data.

Carol Kong, currency strategist at Commonwealth Bank of Australia, said: “The July CPI report showed less evidence of tariffs impacting prices… (but) I think a rate cut in September is not entirely certain, and perhaps not as certain as current market pricing suggests.”

According to CME Group’s FedWatch tool: Market pricing for a 25 basis point rate cut at the September meeting is currently steady at 94%, with a 6% probability of no change in rates.

To reprice these expectations, investors are awaiting key US data on Thursday and Friday, including producer prices, jobless claims, and monthly retail sales.