The Japanese yen declined against major currencies in Asian trading on Thursday, moving away from nine-month highs against the dollar. This marks a potential end to a three-day winning streak, driven by profit-taking.
Tokyo’s latest economic data revealed that producer prices increased by 2.5% in August, falling short of the 2.8% forecast and down from 3.0% in July. This slowdown in producer prices suggests easing inflationary pressures, which may influence the Bank of Japan’s decision to keep interest rates steady at its upcoming September meeting.
The yen’s performance was also affected by rising US 10-year Treasury yields, which have edged higher ahead of the release of US producer price data later today. The USD/JPY pair climbed 0.4% to 142.95 yen per dollar, with a session low of 142.23 yen.
On Wednesday, the yen had gained 0.1% against the dollar, reaching a high of 140.71 yen—its strongest level in nine months—following optimistic comments from a Bank of Japan official about a potential rate hike by year-end.
Despite these gains, investors remain skeptical about a third rate hike by the Bank of Japan at its September 20 meeting, with a higher likelihood of a rate increase in December. Meanwhile, US 10-year Treasury yields rose 0.4% on Thursday, recovering from 15-month lows, which has supported the US dollar.
Recent US consumer price data for August largely met expectations, though core prices were unexpectedly higher on a monthly basis. This persistent inflationary trend could pose challenges for Federal Reserve policymakers. According to the Fedwatch tool, there is a 17% chance of a 0.5% rate cut by the Fed in September and an 83% chance of a 0.25% cut.
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