- USD/JPY oscillates in a tight trading range above the mid-149.00s amid the volatile session.
- US Retail Sales for September came in better than expected.
- The Bank of Japan considered revising its core CPI forecasts for 2023 and 2024 while maintaining its 2025 inflation forecast.
The USD/JPY pair remains confined in a narrow range around 149.75 during the early Asian trading hours on Wednesday. A surge in US Treasury bond yields underpinned the major pair. At nearly the 150.00 mark, investors remain on guard for the possibility of an intervention by Japanese authorities.
However, the Greenback attracted some buyers on the back of the upbeat US data on Tuesday, but the impact was short-lived. The US Census Bureau on Tuesday showed that US Retail Sales for September rose by 0.7% MoM, beating the market consensus of 0.3%. Retail Sales Control Group climbed 0.6% MoM versus 0.2% prior. The data suggest strong momentum in consumption.
Additionally, US Industrial Production climbed 0.3% MoM, stronger than expected. Finally, Capacity Utilization surged to 79.7, better than estimated. Meanwhile, higher US Treasury yields might cap the downside of the USD and act as a tailwind for the USD/JPY pair.
On Tuesday, Minneapolis Federal Reserve Bank President Neel Kashkari stated that inflation has taken considerably longer than expected and is still too high. Philadelphia Fed President Patrick Harker maintained his dovish stance by mentioning that that in the absence of some turn in the data, the Fed should hold rates steady. Traders will take more cues from the Fed officials on Wednesday, including Waller, Williams, and Bowman, which might offer some hints about further monetary policy paths.
Japanese Finance Minister Shunichi Suzuki denied to comment about currency intervention by an International Monetary Fund (IMF) official on Tuesday. Suzuki went on to say that there was no need to go into detail about the factors that impact the currency. Investors await the Japanese inflation data on Friday for fresh impetus. The National Consumer Price Index (CPI) ex-Fresh Food for September is expected to rise 2.7% YoY from 3.1% in the previous reading.
Furthermore, Japan’s top financial diplomat Masato Kanda said on Monday that the Japanese Yen (JPY) continued to be considered a safe-haven asset, comparable to the Swiss franc and US dollar, and was benefiting from safe-haven flow caused by the rising geopolitical tension in the Middle East. Kanda additionally affirmed that if excessive moves occurred in the currency market, the authorities would take steps such as raising interest rates or intervening in the market.
On Tuesday, a media report that the Bank of Japan was considering revising its core CPI forecast for the fiscal years 2023 and 2024 while keeping its inflation forecast for 2025.
Later on Wednesday, the US Housing Starts and Building Permits will be released. The attention will shift to the Japanese inflation data on Friday. Traders will take cues from the data and find trading opportunities around the USD/JPY pair.
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