According to FXStreet, on November 13, the Japanese Yen (JPY) continued to weaken against the US Dollar (USD) for the third consecutive day, pushing the USD/JPY exchange rate above 155.00. This is the first time the Japanese Yen has surpassed 155.00 against the US Dollar since July.
Although Japan's producer price index (PPI) has risen, investors are still worried that an unstable government in Japan will make it difficult for the Bank of Japan (BoJ) to raise interest rates further.
Japan's producer price index (PPI) rose 3.4 percent in October from a year earlier and 0.2 percent from the previous month, a preliminary report from the BoJ showed. While the increase could push up inflation, there are concerns that rising producer prices due to a weak yen could hurt consumer spending.
In addition, political instability in Japan has raised doubts about the BoJ’s ability to tighten policy, causing the Yen to weaken further and pushing the USD/JPY pair higher. Minutes from the BoJ’s October meeting showed policymakers were still debating the timing of a rate hike, especially as Trump looks to impose protectionist tariffs.
Meanwhile, the dollar continued to strengthen, hitting its highest level since April, as expectations that Trump’s policies will boost inflation prompted the Fed to reconsider its policy easing. Richmond Fed President Tom Barkin commented that while inflation appears to be falling, it is likely to remain above the Fed’s target and the labor market could continue to weaken.
According to CME Group's FedWatch tool, traders currently rate a less than 60% chance that the Fed will cut interest rates by 25 basis points and a roughly 40% chance of keeping interest rates unchanged at the FOMC meeting next December.
The 10-year US Treasury yield has remained high since Trump’s election, supporting the USD and putting pressure on the JPY with lower yields. However, USD bettors are now holding off ahead of the US inflation report, with the Consumer Price Index (CPI) expected to have risen 2.6% over the past 12 months.
