USD/JPY – Dollar Climbs to 4-Month Highs Against Sagging Yen

The US dollar continues to gain ground against the Japanese yen, as USD/JPY trades in the mid-103 range early in the North American session. In Japan, All Industries Activities, a minor event, posted a -0.4% decline and missed expectations.

All eyes are on the Federal Reserve, which will release the minutes of its last policy meeting later on Wednesday. Traders looking for clues as to when the Fed will press the trigger and raise interest rates, but Fed chair Janet Yellen might not oblige. US growth numbers have been positive, but job data could be better and inflation remains very low. The Fed's asset purchase program (QE) is scheduled to wind up in October, and a rate hike appears to be a question of timing.

The US economy has been moving in the right direction, but inflation numbers in the US remain at very low levels. On Tuesday, CPI and Core CPI, the primary gauges of consumer inflation, both posted paltry gains of 0.1%. These weak readings come on the heels of PPI, a manufacturing inflation index, which also came in at 0.1% last month. Weak inflation is one reason why the Federal Reserve is in no rush to raise interest rates, as low inflation points to slack in the economy. Meanwhile, US housing numbers were sharp on Tuesday. Building Permits improved to 1.05 million, beating the estimate of 1.00 million. Housing Starts jumped to 1.09 million, easily beating the estimate of 0.97 million.

Financial leaders and central bankers from around the world will gather in Jackson Hole, Wyoming for a conference which starts on Friday. This will be Janet Yellen's first appearance as Fed chair at the conference, and will undoubtedly be the star of the show. Yellen is expected to discuss the employment market rather than monetary policy, but the markets will be listening closely for any hints as to an interest rate hike.

USD/JPY 103.31 H: 103.40 L: 102.90