Japan’s currency remains weak despite cooling US inflation data, pressured by Middle East tensions and rising oil prices.
The Japanese Yen (JPY) traded near 162.00 against the US Dollar (USD) on Wednesday, close to its 40-year low of 162.85. Weaker-than-expected US inflation data failed to lift the Yen, as geopolitical risks and higher oil prices weighed on the oil-importing economy.
US Consumer Price Index (CPI) rose 3.5% year-on-year in June, down from 4.2% in May and below the 3.8% consensus. Monthly inflation contracted 0.4%, the weakest reading since April 2020. The data reduced expectations for immediate Federal Reserve rate hikes, pushing US Treasury yields and the USD lower.
Despite the USD’s retreat, the Yen showed little strength. Rising Middle East tensions supported oil prices, increasing costs for Japan. Additionally, reports indicated no immediate plans to reallocate pension fund investments, including those of the Government Pension Investment Fund (GPIF).