Swaps price an 80% chance of a Bank of Japan rate hike in September, countering resilient US PMI data supporting higher-for-longer Fed policy.
The Japanese Yen steadies against the US Dollar near 159.00 on Friday, balancing BoJ rate hike expectations against robust US economic data. July inflation in Japan rose 1.9% year-over-year, while August business surveys exceeded forecasts, fueling bets for a September BoJ move.
US flash PMI data showed private sector activity accelerating, with the Composite index climbing to 56 from 54.5, driven by a strong services reading. Manufacturing, however, missed expectations. The data reinforces expectations of prolonged Fed policy tightening, limiting USD downside despite a weekly loss.
The US Treasury announced plans to double buybacks of longer-dated debt to ease bond market strains, while geopolitical shifts toward sanctions on Iran improved risk sentiment. These factors offset safe-haven demand for the Yen, keeping USD/JPY rangebound.