Traders boost expectations for a 2026 Fed rate increase after strong US inflation and retail sales data lift the dollar.
The USD/JPY pair climbed to a two-week high near 158.50 in Asian trading, extending its weekly uptrend as the US dollar strengthened. The move follows hotter-than-expected US inflation data and a third consecutive month of retail sales growth, fueling bets for a Federal Reserve rate hike in 2026.
Japan’s Producer Price Index surged 4.9% year-over-year in April, driven by rising oil and import costs amid Middle East tensions. Despite intervention concerns, the yen’s decline persisted as geopolitical risks and Fed policy expectations supported the dollar’s rally.
The pair is set for significant weekly gains, marking its fifth straight day of modest advances. US-China relations showed signs of stabilization after high-level talks, though broader geopolitical uncertainties remain.