The USD/JPY pair rose to nearly 145.20 this morning, its highest level in nearly three weeks, according to FXStreet, after Japan released its Tokyo consumer price index (CPI). Investors are awaiting the US personal consumption expenditure (PCE) price index data for August, due later on Friday.
Tokyo's CPI rose 2.2 percent year-on-year in September, down from 2.6 percent in August, the Statistics Bureau reported. The CPI excluding fresh food and energy also rose 1.6 percent year-on-year, the same as the previous release. Tokyo's CPI excluding fresh food rose 2.0 percent in September, down from 2.4 percent in August and in line with market expectations.
The Japanese Yen (JPY) weakened slightly after the inflation data was released. Despite the slowing inflation, the Bank of Japan (BoJ) may still raise interest rates later this year if the economy continues to grow as expected. However, there are some concerns about the direction of Japanese interest rates, which could limit the JPY's upside and help USD/JPY maintain its upward momentum in the near term.
BoJ Governor Kazuo Ueda recently said the central bank is in no rush to raise interest rates and will wait for more data before making a decision. The BoJ is expected to leave rates unchanged at its October meeting.
Meanwhile, the US Federal Reserve (Fed) cut interest rates sharply last week and is expected to cut another 50 basis points (bps) before the end of the year. Fed Governor Lisa Cook said she supported cutting interest rates to reduce risks to the labor market. The dovish statements from the Fed could weaken the US dollar (USD) against the JPY in the short term.
Investors will be closely watching the U.S. core personal consumption expenditures (PCE) price index for August, seen as the Fed’s preferred inflation gauge, due on Friday. A stronger-than-expected reading could reduce the likelihood of a rate cut in November, which could help support the dollar.
According to Lao Dong, at 7:00 a.m. on September 27, the exchange rate of the Japanese Yen against the US dollar is currently hovering around the lowest level of the day at 144.75 JPY and the highest at 145.45 JPY.
