Yen hits one-year low as focus shifts to US inflation data

Yen hits one-year low as focus shifts to US inflation data

Written by Brigid Riley

TOKYO (Reuters) – The Japanese yen hit a one-year low against the dollar on Monday as traders awaited another set of U.S. inflation data that is expected to provide more clues this week on whether the Federal Reserve has more work to do to reduce inflation. . Taming price pressures.

Most traders will be firmly focused on the US CPI numbers due on Tuesday after the Fed’s policy meeting this month eased its hawkish stance, although Fed Chairman Jerome Powell hinted last week that the battle against inflation may not be over yet. .

In addition to the data, more Fed spokesmen are lining up this week and are likely to echo Chair Powell in leaving the door open for further hikes, said Matt Simpson, chief market analyst at City Index.

“Even if we deal with a lower CPI reading, the Fed will likely continue to push back on rate cut hopes because it is not in its interest to even consider cutting rates, let alone mention it while inflation remains above target,” he said.

The market reacted weakly to the news announced shortly before the close of forex trading in New York on Friday that Moody’s had lowered its credit rating outlook for the United States to “negative.”

The dollar index, which measures the value of the dollar against a basket of currencies, was last reading 105.80.

However, there was little relief for the yen, which was under pressure from rising US Treasury yields and continued strength of the dollar.

The Japanese currency briefly touched 151.78 yen to the dollar on Monday, a new low in a year. The last time it was 151.75.

A hot number from one of the US economic data released this week “would certainly do the trick” in pushing the dollar/yen into the 152 range, said Tony Sycamore, market analyst at IG.

“Instead, a continuation of a more supportive risk backdrop will likely tempt carry buyers to add to their positions and test the (BoJ) gauge.”

Meanwhile, data from Japan on Monday showed that wholesale inflation slowed to below 1% for the first time in just over two-and-a-half years, suggesting that the cost pressures that have been pushing prices higher are beginning to fade and are providing little support to the economy. yen.

The upward trend in prices prompted the Bank of Japan to raise its inflation forecasts at its October monetary policy meeting, as markets continued to search for signs that the bank may be about to exit its ultra-loose monetary policy.

Elsewhere, the pound was steady at $1.2231 to the dollar ahead of the UK’s average weekly income data on Tuesday and the CPI reading on Wednesday, after GDP data last week showed the economy was failing to grow.

The euro is hovering around $1.0688.

(Reporting by Brigid Riley; Editing by Shri Navaratnam and Sam Holmes)

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