MarketPulse | May 25, 2022 01:04AM ET
After several days of trading sideways, the yen posted strong gains on Tuesday. In the North American session, USD/JPY was trading at 126.58, down 1.02% on the day. The yen reached its highest level in five weeks.h2 BoJ CPI stronger than expected/h2
The Bank of Japan’s preferred inflation gauge, BoJ CPI, surprised the markets with a gain of 1.4% in April, higher than the consensus estimate of 1.0%. The index was up from 1.1% in March and is reflective of inflation moving higher.
Of course, Japan is not facing the surging inflation which has hit the US, UK and other developed economies, but it is a significant change nonetheless, after years of deflation.
Japan’s CPI excluding fresh food is expected to remain above 2%, which is the BoJ’s inflation target.
While other major central banks have tightened policy in response to spiraling inflation, the BoJ continues to insist that cost-push inflation will ease. The Bank has tenaciously defended its yield curve control, maintaining that ultra-low rates are critical in order to support the fragile economy.
The BoJ has not hesitated to intervene in order to cap JGB rates, but has not made any moves to prop up the yen, which hit 20-year lows earlier this month.
The yen may have flexed some muscles, but I would still consider yen risk tilted to the downside. The US economy remains in good shape, and the US dollar is also a safe-haven asset.
If the Ukraine war continues to cause increases in energy and food prices, risk appetite would fall and investors would likely flock to the safety of the US dollar.
The yen is at the mercy of US yields, which have generally been on an upswing over the past few months, pushing the yen sharply low.
USD/JPY Technical
Original Post
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.