Japanese Yen extends decline against USD amid rising hawkish Fed bets

The Japanese Yen faces pressure against the US Dollar as hawkish Fed bets accelerate.
Hot US CPI data has prompted fears of at least one Fed interest rate hike this year.
The next major trigger for global markets will be the outcome of the Trump-Xi meeting.

Sagar Dua FXStreet

The Japanese Yen (JPY) trades lower against the US Dollar (USD) during the European trading session on Wednesday, with the USD/JPY pair edging higher to near 157.70. The pair gains as the US Dollar (USD) strengthens due to growing expectations that the Federal Reserve (Fed) could deliver at least one interest rate hike this year.

US Dollar Price Today

The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the strongest against the New Zealand Dollar.

	USD	EUR	GBP	JPY	CAD	AUD	NZD	CHF
USD		0.11%	0.00%	0.08%	0.03%	0.06%	0.21%	0.05%
EUR	-0.11%		-0.12%	-0.06%	-0.06%	-0.06%	0.09%	-0.09%
GBP	-0.00%	0.12%		0.09%	0.02%	0.06%	0.22%	0.04%
JPY	-0.08%	0.06%	-0.09%		-0.04%	-0.01%	0.11%	-0.02%
CAD	-0.03%	0.06%	-0.02%	0.04%		0.02%	0.17%	0.00%
AUD	-0.06%	0.06%	-0.06%	0.01%	-0.02%		0.15%	-0.01%
NZD	-0.21%	-0.09%	-0.22%	-0.11%	-0.17%	-0.15%		-0.17%
CHF	-0.05%	0.09%	-0.04%	0.02%	-0.01%	0.01%	0.17%

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).

As of writing, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, holds close to the weekly high of 98.46 posted on Tuesday.

Hawkish Fed bets have escalated following the release of the United States (US) Consumer Price Index (CPI) data for April, which showed that inflationary pressures grew at a faster-than-expected pace. The data showed on Tuesday that the US headline CPI grew at a robust pace of 3.8% Year-on-Year (YoY) compared to 3.7% estimates and the previous reading of 3.3%.

According to the CME FedWatch tool, the odds of the Fed delivering at least one interest rate hike by the end of this year have increased to 35.3% from 23.5% seen before the US CPI data release.

In Wednesday’s session, investors will focus on the US Producer Price Index (PPI) data for April, which will be published at 12:30 GMT.

Going forward, the major trigger for the US Dollar and global markets will be the meeting between US President Donald Trump and Chinese leader Xi Jinping during Trump’s visit to Beijing this week.

Meanwhile, the Japanese Yen trades subduedly despite US Treasury Secretary Scott Bessent’s confirmation of joint efforts with Japan against excessive volatility in currency markets. Bessent’s confirmation resulted in a knee-jerk reaction in USD/JPY on Tuesday; however, it lacked follow-through.

Economic Indicator

Consumer Price Index (YoY)

Inflationary or deflationary tendencies are measured by periodically summing the prices of a basket of representative goods and services and presenting the data as The Consumer Price Index (CPI). CPI data is compiled on a monthly basis and released by the US Department of Labor Statistics. The YoY reading compares the prices of goods in the reference month to the same month a year earlier.The CPI is a key indicator to measure inflation and changes in purchasing trends. Generally speaking, a high reading is seen as bullish for the US Dollar (USD), while a low reading is seen as bearish.

Why it matters to traders?

The US Federal Reserve (Fed) has a dual mandate of maintaining price stability and maximum employment. According to such mandate, inflation should be at around 2% YoY and has become the weakest pillar of the central bank’s directive ever since the world suffered a pandemic, which extends to these days. Price pressures keep rising amid supply-chain issues and bottlenecks, with the Consumer Price Index (CPI) hanging at multi-decade highs. The Fed has already taken measures to tame inflation and is expected to maintain an aggressive stance in the foreseeable future.

Author

Sagar Dua

FXStreet

Sagar Dua is associated with the financial markets from his college days. Along with pursuing post-graduation in Commerce in 2014, he started his markets training with chart analysis.

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