Solid Gold Berjangka – The USD/JPY pair hovered around 158.37 during Tuesday’s Asian trading session (October 20), with the yen remaining under pressure against the US dollar. Investors are opting to wait for Japan’s inflation data, due for release on Friday, while rising US Treasury yields provide further support for the dollar.
Japanese Prime Minister Sanae Takaichi dismissed suggestions that her policies are the cause of the yen’s weakness and high interest rates. She emphasized that the government intends to strengthen confidence in the domestic currency by fostering more robust economic growth and controlling the issuance of government bonds in the upcoming fiscal year’s budget.
On the monetary front, Bank of Japan (BoJ) Governor Kazuo Ueda stated that Japan’s underlying inflation is moving closer to the 2% target. He also warned that long-term bond yields could continue to climb if the market perceives the BoJ as being too slow to raise its benchmark interest rate. Nevertheless, expectations for near-term policy tightening remain relatively limited.
The market anticipates that Japan’s headline inflation for September will rise to approximately 2.1% year-on-year, with core inflation—excluding fresh food—also projected to reach 2.1%. However, the likelihood of a BoJ rate hike at the end of October remains very low, while the probability of an increase in December is considered significantly higher, reflecting a gradual approach to policy normalization.
In the US, Treasury yields remain elevated ahead of the Federal Reserve’s meeting later this month. The market assigns an 82.8% probability that the Fed will keep interest rates unchanged in October, while the likelihood of a hike in December stands at approximately 93.6%. As long as the policy divergence between the Fed and the BoJ remains wide, the USD/JPY pair is likely to stay within a high range, with the 155–160 zone serving as a key area of focus for the market. (srh)