Japanese Yen hangs near two-week low vs USD as Japan’s National CPI fails to impress bulls

USD/JPY trades with a positive bias for the fifth straight day and flirts with a nearly two-week top.
Economic concerns due to the Hormuz standoff and delayed BoJ rate hike bets undermine the JPY.
Less dovish Fed expectations support the USD and the pair, though intervention fears cap the upside.

Haresh Menghani FXStreet

The USD/JPY pair sticks to its positive bias for the fifth straight day and trades around the 159.80 area, or a nearly two-week top during the Asian session on Friday. Spot prices remain on track to register strong weekly gains, though the mixed fundamental backdrop makes it prudent to wait for a breakout through over a one-month-old range before positioning for a firm near-term direction.

The Japanese Yen (JPY) continues with its relative underperformance amid economic concerns stemming from intensifying tensions in the Middle East, which, along with a bullish US Dollar (USD), acts as a tailwind for the USD/JPY pair. Investors remain skeptical about a durable agreement between the US and Iran amid the lack of progress in peace talks due to the American blockade of Iranian ports. Iran has set the complete removal of the US naval blockade as a strict precondition for resuming negotiations.

Meanwhile, Iran attacked three ships in the Strait of Hormuz on Wednesday and seized two of them. This adds to worries that Japan's economy will come under substantial strains due to continued disruptions to energy supplies through the strategic waterway. Adding to this, expectations that the Bank of Japan (BoJ) will hold interest rates steady at its upcoming April meeting, bolstered by the latest inflation figures, turn out to be another factor undermining the JPY and supporting the USD/JPY pair.

A government report showed that Japan's headline Consumer Price Index (CPI) recovered from its lowest level in nearly four years and rose to the 1.5% YoY rate in March. Moreover, the core gauge, which excludes volatile fresh food costs, climbed 1.8% from 1.6% in February, though it remained below the BoJ's 2% annual target. That said, the Core CPI that excludes both fresh food and fuel costs rose 2.4%, suggesting that price pressures remain sticky and backing the case for an imminent BoJ rate hike.

The data, however, does little to provide any respite to the JPY bulls. The US Dollar (USD), on the other hand, preserves its gains registered over the past three days amid persistent geopolitical uncertainties and fading dovish US Federal Reserve (Fed) bets. This further contributes to a positive tone surrounding the USD/JPY pair. However, speculations that Japanese authorities will step in to stem further weakness in the domestic currency help limit deeper JPY losses and cap gains for the currency pair.

Economic Indicator

National CPI ex Fresh Food (YoY)

Japan’s National Consumer Price Index (CPI), released by the Statistics Bureau of Japan on a monthly basis, measures the price fluctuation of goods and services purchased by households nationwide excluding fresh food, whose prices often fluctuate depending on the weather. The YoY reading compares prices in the reference month to the same month a year earlier. Generally, a high reading is seen as bullish for the Japanese Yen (JPY), while a low reading is seen as bearish.

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