FX.co ★ Yen Weakens as Dollar Rebounds

The Japanese yen weakened beyond 154 per dollar on Friday, pulling back from nearly seven‑month highs as the US dollar rebounded. The move followed data showing that US producer prices accelerated in August, strengthening expectations of a Federal Reserve rate hike next week.

The yen also came under pressure from sharply higher oil prices, which kept inflation risks elevated amid ongoing geopolitical tensions between the US and Iran, with neither side showing signs of de-escalation.

At the same time, domestic data showed that Japanese producer prices rose 7.6% in August, reinforcing expectations that the Bank of Japan could raise interest rates this month. Business sentiment among large manufacturers also improved markedly in the third quarter, reaching its highest level since the fourth quarter of 2021, supported by robust government stimulus measures.

Despite Friday’s pullback, the yen remained more than 3% stronger so far this month, underpinned by expectations of more aggressive BOJ tightening, the unwinding of carry trades, and increased capital repatriation.