Tokyo CPI data and Middle East tensions weigh on the yen, while rising oil prices and US rate expectations support the dollar.
The USD/JPY pair retreated to around 163.70 in Asian trading Wednesday after modest gains the prior day. The yen held ground despite rebounding oil prices, which threaten Japan’s inflation outlook as a major energy importer.
Tokyo’s July CPI excluding fresh food is expected to rise to 1.7% year-over-year, up from 1.6% in June. Headline inflation previously matched this level, while core CPI excluding food and energy stood at 1.9%. Japan’s unemployment rate is forecast to remain steady at 2.5%.
Geopolitical risks, including an Iranian missile strike on US troops in Jordan, may bolster the dollar amid risk aversion. All missiles were intercepted, but tensions persist ahead of key US and Japanese economic data.