The Japanese yen declined in Asian trading on Friday against a basket of major and minor currencies, deepening its losses for the second consecutive session versus the US dollar, hitting a three-week low. The drop came as expectations of a US Federal Reserve rate cut in September receded.
The Japanese currency is on track to post its biggest weekly loss in a month and a half, despite stronger-than-expected data on core inflation in Japan, which kept alive the possibility of a rate hike by the Bank of Japan.
Price Overview
Yen exchange rate today: The dollar rose more than 0.2% against the yen to ¥148.69, the highest since August 1, from an opening level of ¥148.37, after touching a low at ¥148.24.
On Thursday, the yen ended down 0.7% against the dollar, its first loss in three days, after strong US economic data.
US Dollar
The dollar index rose 0.1% on Friday, extending gains for a second session to reach a two-week high at 98.70 points, reflecting continued strength of the US currency against a basket of majors and minors.
This momentum is being driven by renewed demand for the dollar as the best available investment in FX markets, following robust US data in August confirming that the world’s largest economy continues to grow at a pace exceeding forecasts, despite headwinds from President Donald Trump’s aggressive trade policies.
US Interest Rates
Following those data, CME FedWatch showed that the probability of a 25-bp rate cut in September fell from 81% to 75%, while odds of leaving rates unchanged rose from 19% to 25%.
To reprice those expectations, global markets are now awaiting Fed Chair Jerome Powell’s speech later today at the annual Jackson Hole symposium.
Weekly Performance
So far this week, the yen is down about 1.1% versus the dollar, heading for a second loss in three weeks and its biggest weekly decline since early July.
Japanese Inflation
Data from Tokyo on Friday showed that core consumer prices rose 3.1% in July, above the 3.0% consensus, after climbing 3.3% in June.
These figures underscore persistent inflationary pressures facing Bank of Japan policymakers, strengthening the case for another rate hike before year-end.
Japanese Interest Rates
Market pricing for a 25-bp rate hike by the BOJ in September is steady at around 40%.
Investors await more data on inflation, unemployment, and wages to recalibrate expectations.
BOJ Governor Kazuo Ueda is scheduled to speak at Jackson Hole, with comments expected to offer further guidance on the normalization path.
A survey showed that 63% of economists expect the BOJ to raise the policy rate to at least 0.75% by year-end, up from 54% in July’s survey.
Meanwhile, 92% expect the BOJ to keep the rate at 0.50% through September’s meeting.
