USD/JPY trades around 158.85 on Friday at the time of writing, edging lower after rebounding from the 158.00 level on Thursday.
The pair remains under pressure as the Japanese Yen (JPY) benefits from fresh inflation data supporting further monetary tightening in Japan, while the US Dollar (USD) remains close to its lowest levels since May
In Japan, the core Consumer Price Index (CPI), which excludes fresh food, rose 1.8% YoY in July, following a 1.6% increase in June. This marks its fastest pace since January. The index excluding both fresh food and energy also accelerates to 1.9%, from 1.7% previously.
These figures reinforce expectations that the Bank of Japan (BoJ) could continue normalizing its monetary policy. The prospect of higher Japanese interest rates therefore provides support to the Japanese Yen, although the still-wide interest rate differential between the United States (US) and Japan could limit the Japanese currency’s appreciation. On the US side, the US Dollar Index (DXY), which measures the Greenback’s performance against a basket of six major currencies, remains close to its lowest level since May 14.