The Japanese yen touched a fresh one-year low against the US dollar on Monday, November 13, as market participants eagerly awaited the release of crucial US inflation data later in the week. Traders are seeking further insights into whether the Federal Reserve will intensify its efforts to curb inflationary pressures.
The focal point for many in the financial markets is the upcoming US Consumer Price Index (CPI) numbers scheduled for Tuesday. Following the recent Fed policy meeting that tempered its hawkish stance, Fed Chair Jerome Powell hinted last week that the battle against inflation may not be concluded.
Market analysts anticipate that even if the CPI print reveals a softer inflation figure, the Federal Reserve is likely to maintain a cautious approach and push back against expectations of rate cuts. This sentiment is reinforced by Matt Simpson, Senior Market Analyst at City Index, who notes that it is not in the Fed’s interest to consider rate cuts while inflation remains above the target.
The news of Moody’s lowering its outlook for the US credit rating to “negative” had a muted impact on the market as the dollar index, measuring the greenback against a basket of currencies, remained mostly flat at 105.80.
Despite this, the Japanese yen faced continued pressure, briefly touching 151.78 yen against the dollar, marking a fresh one-year low. Factors contributing to the yen’s decline include rising US Treasury yields and the sustained strength of the US dollar.
Tony Sycamore, a market analyst at IG, suggests that a strong US economic data release this week could push the dollar/yen pair to the 152 range. On the other hand, a supportive risk backdrop might attract carry buyers to add positions and test the Bank of Japan’s response.
Data from Japan on Monday indicated that wholesale inflation slowed below 1 percent for the first time in over two-and-a-half years. This suggests that the cost pressures driving up prices may be subsiding, providing little support for the yen.
Meanwhile, in other currency markets, sterling maintained its position at US$1.2231 ahead of the release of UK average weekly earnings data on Tuesday and a CPI reading on Wednesday. This follows last week’s GDP data, which revealed a lack of growth in the UK economy.
The euro hovered around US$1.0688 in the midst of these currency dynamics. As the week progresses, market participants will closely monitor the unfolding developments in the US and global currencies, particularly in response to the Federal Reserve’s stance on inflation and economic indicators from major economies.
