FX.co ★ Yen Holds Steady After Inflation Data

The Japanese yen was steady around 159 per dollar on Friday after a bout of heightened volatility earlier in the week, as data showed Japan’s inflation rate accelerated for a second straight month, bolstering expectations of a near-term interest rate hike by the Bank of Japan. Markets are increasingly pricing in a possible move in September, with BOJ Governor Kazuo Ueda signaling that policymakers could quicken the pace of policy normalization.

The yen rallied nearly 1% on Wednesday after the US Treasury Department announced an expansion of its debt buyback program aimed at containing borrowing costs. However, it surrendered more than half of those gains on Thursday amid concerns that Washington’s plan may offer only a temporary reprieve. The currency also remains under longer-term pressure from wide interest rate differentials, growing fiscal worries, and elevated energy and import costs.