The yen advanced to 154.18 per dollar on Friday, putting it on track for a second straight weekly gain as traders raise bets on a Bank of Japan rate hike next week. The dollar held near 99.04 on the Dollar Index after August's consumer price data matched expectations, leaving Federal Reserve rate-hike odds for its own meeting at 71.3%.
Yen rides BOJ hike bets to second weekly gain
The yen advanced 0.14% on the day to 154.18 per dollar, outperforming its major G10 peers. For the week, the currency secured a 1.2% gain, marking its second consecutive weekly advance and its longest winning streak since May.
The move reflects growing conviction that Bank of Japan Governor Kazuo Ueda and the Governing Council will raise borrowing costs at their Sept. 17-18 meeting. Tokyo reported Friday that Japan's Corporate Goods Price Index jumped 7.6% year-on-year in August, beating consensus expectations of 7.4% and confirming that import costs are feeding into domestic pipeline inflation. Markets are pricing high odds that the BOJ will hike its benchmark rate by 25 basis points to 1.25% next week.
DBS analysts note that while a quarter-point hike is widely expected, markets will focus on whether policymakers signal a flexible, data-dependent path rather than committing to rapid successive increases.
Dollar steadies after in-line CPI, Fed odds jump
The Dollar Index held around 99.04, little changed after U.S. consumer prices rose 3.4% year-on-year in August, unchanged from July. Underlying inflation told a less comfortable story: core CPI accelerated to 0.3% month-on-month, above the 0.2% consensus, even as the annual core rate eased to 2.4%. Gasoline alone rose 3.9% and accounted for more than a third of the headline increase, while shelter costs firmed to 0.3% on the month.
Thursday's producer price report showed final-demand prices rising 5.4% year-on-year. As a result, futures markets tracked by CME FedWatch pushed the odds of a 25-basis-point Fed hike at the Sept. 15-16 meeting up to 71.3%, from 61.2% earlier in the week. The 10-year Treasury yield hovered near 4.97%, approaching the 5% threshold, while Brent crude traded near $109 a barrel after fresh Middle East escalations.
AJ Bell's investment director Russ Mould said: "The stakes have been ratcheted up ahead of US inflation data later".
Sources: Investing.com, ActionForex
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