The USD/JPY briefly topped 160.00 to hit its highest level in over a month. Safe-haven demand for the US dollar amid the war in the Middle East is an important factor, as is the expectation that persistent inflation could lead to Federal Reserve rate hikes before the year-end. But it’s a yen story as well. Concerns over Japan’s economic outlook, rising energy costs and weaker services sector activity continue to weigh on the currency.
Source: TN Trader
In addition, Japan’s government under Prime Minister Sanae Takaichi wants to unleash fiscal stimulus through tax cuts and other measures, despite entrenched government indebtedness, while the Bank of Japan wants to raise rates to choke off inflation.
Overnight, Ms Takaichi said she had affirmed with other G7 members that excessive currency moves are bad for the economy, and that FX policy is important to support it. This suggests that Japan is preparing to intervene to support the yen once more, possibly with the help of other countries.
Earlier this morning, Bank of Japan (BOJ) Governor Kazuo Ueda warned that the risks from high inflation must be put above fears of downside economic risks. This increased expectations that the BOJ will raise rates once again next week.
* The information provided does not constitute investment advice nor take into account the individual financial circumstances or objectives of any investor. Any information that may be provided relating to past performance is not a reliable indicator of future results or performance.
