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Forex▼ Bearish
Yen hovers near 40-year low after CPI, dollar eases
USD/JPY sits at 147.60, within striking distance of the 147.80 level that triggered Japan's last intervention. The carry trade pays 530 bps annually. BOJ meets Sep. 22.
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The yen wobbled near its weakest level against the dollar in 40 years early in Asia on Friday. Traders pulled back on bets for further Federal Reserve rate hikes after the August CPI report met forecasts and central bank officials sent mixed signals.
Tokyo opened with USD/JPY at 147.60, within touching distance of the 147.80 level first reached in October 2023. That print matches a low not seen since 1985 and puts the pair squarely in the zone where Japan's finance ministry last intervened.
The dollar index eased 0.2% overnight. Headline CPI came in at 3.7% year on year, a tick above the consensus 3.6% but in line with the range of private sector forecasts. Core CPI slowed to 4.3%, missing the 4.4% estimate by one decimal.
The print left September's rate decision wide open. Two Fed regional presidents spoke after the release. One called for a pause. The other said rates may need to go higher. Markets priced an 8% chance of a September hike and a 45% chance of a November move, little changed from the prior session.
Sterling and the euro both popped 0.5% against the greenback after the data, then gave back half the gain by the New York close. That fading move suggests the dollar's pullback was more a positioning squeeze than a trend shift. Why Lloyds Thinks the US Dollar Rally Has Further to Run points to the structural factors keeping the greenback supported despite the pause.