Forex Today: Yen rallies on BoJ verbal intervention, but US dollar bulls perked-up

Here is what you need to know for Thursday, September 15:

The US dollar that fell to a low of 109.257 did not stay down there for long on Wednesday and the index rallied back to test the 109.70s in New York. Technically, the index is on course for the 109.90s again ahead of what is expected to be a hawkish Federal Reserve outcome next week. 

Meanwhile, Wednesday's inflation data was more benign, showing producer prices (PPI) declined for a second straight month in August as gasoline prices fell further, but this was not enough for markets to price put the Fed's aggressive stance.

The US Department of Labor reported that August’s Producer Price Index (PPI) moderated, dropping 0.1% MoM, aligned with forecasts, while the annual reading edged lower by a full percentage point to 8.7% vs. 9.8% in the previous month. Core PPI, every month rose by 0.4% but annually exceeded estimations, topping at around 7.3%.

There have been no Federal Reserve speakers this week as the media blackout went into effect at midnight Friday ahead of Chair Jerome Powell’s post-decision press conference on September 21.

Traders expect 75 basis points when its policy committee meets next week and lower market hopes for a smaller increase. However, there is a one-in-five chance that the Fed will raise rates by a full percentage point, up from zero a day before the inflation report according to FEDWATCH.  The two-year US Treasury yield, a bellwether for interest rate expectations, rose 3.834% Wednesday.

As for other central banks, the yen rose 1% against the dollar on Wednesday after the Bank of Japan conducted a rate check-in in possible preparation for currency intervention. According to Reuters, central bank officials called up dealers and asked for the price of buying or selling yen. ''However, actually intervening to support the currency would be a larger step.''  

At the same time, Japanese Finance Minister Shunichi Suzuki told reporters on Wednesday that recent yen moves have been "rapid and one-sided", adding that yen-buying currency intervention was among the government's options should such moves continue. USD/JPY dropped from a high of 144.96 to a low of 142.55.

The euro was nearly flat against the dollar around 0.9980 but travelled between a high of 1.00236 and 0.99767 on the day. 

GBPUSD ranged between 1.1480 and 1.1590 and ended the day higher despite a recovery in the greenback and data that showed that inflation ticked lower in August after breaking the 10% threshold, which was last seen in 40 years. 

Ahead of today's labour market data, AUD/USD formed a double bottom near 0.6700 and climbed towards its daily high at 0.6760. It will be a busy day for the antipodeans with New Zealand growth data to start ahead of the Unemployment number later in the session. 

New Zealand’s second quarter Gross Domestic Product data are out today. ''We’ve pencilled in a 0.4% quarter-on-quarter expansion, but given data volatility and mixed signals going in, a read plus or minus 1 percentage point of our pick would not surprise,'' analysts at ANZ Bank said.

''And while the RBNZ have growth of 1.8% QoQ pencilled in, we think a disappointment today is unlikely to carry much weight in terms of monetary policy settings. CPI and wage inflation pressures are still way too high, which combined with ongoing fiscal stimulus this fiscal year (the year to 30 June 2023), suggests the RBNZ has little choice but to carry on with OCR hikes to at least 4%. Indeed, in a world of biting capacity limits, weaker than expected activity doesn’t necessarily mean inflation is poised to slow.''

As for the Aussie jobs numbers, ''after the huge disappointment last month, August jobs report may show some modest improvement as indicators of labour demand (e.g., job ads) remain strong,'' analysts at TD Securities argued. ''However, we see downside risk if COVID-related disruptions on the labour market persist. A poor jobs report likely seals the outcome for a 25bps hike (TD: 25bps) in October after the Governor struck a dovish tone last week.''

In crypto, volatility struck as traders positioned in preparation for Ethereum's transition to Proof-of-Stake. Bitcoin and Ethereum have retraced more than 7% over the past 24 hours. 

In commodities, gold fell to a low of $1,693.78 from a high of $1,707.07 while WTI came up for air, printing a high of $90.17.