The yen strengthened during the session here today, dropping from US afternoon highs above 152.00 to lows towards 151.40. Fingers were pointed at ‘wholesale’ inflation data. The PPI data from Japan for November was published by the Bank of Japan. It showed that inflation in Japan’s corporate goods prices accelerated to the fastest pace in 16 months. This ratcheting higher of price pressures argues, at the margin, for further BoJ policy normalisation, including rate hikes.

As an aside there was also a report in Japanese media of a 4% corporate tax surcharge to fund defence spending. There were some extrapolations made that if Japan is to fund more of their own defence (which seems not unreasonable under the incoming Trump administration) they may sell some of their US government bond holdings to generate some cash (and buy yen in the process to bring the funds home). This may have been a factor in the yen bid, but I’d not be getting too gung-ho on this immediately.

There was other data from Japan today, Reuters Tankan and Japan’s Ministry of Finance Business Outlook survey (see bullets above for details on both) but these are generally not immediate FX market movers.

The Indian central bank, the Reserve Bank of India, was likely intervening today, selling US dollars to limit rupee depreciation.

Major FX traded in limited ranges (except for JPY) ahead of the US CPI data due at 0830 US Eastern time today. As a heads up, Andrew Hauser, Deputy Governor of the Reserve Bank of Australia, is speaking at 6 pm Sydney time (0700 GMT, 0200 US Eastern time) at the Australian Business Economists Annual Dinner. I don’t have a topic for this.

Gold traded above USD2700 briefly.

usdjpy wrap 11 December 2024 2