The Japanese yen is slightly lower on Wednesday. In the North American session, USD/JPY is trading at 149.25, up 0.16% on the day.
Japanese yen flexing muscles
What is the best performing G-10 currency against the US dollar this year? Surprisingly, the Japanese yen is the winner, with gains of about 5% against the greenback. This is a remarkable turnaround from 2024, when the yen plunged 11.4% against the US dollar and sank to its lowest level in 38 years.
The yen’s newfound strength is largely due to expectations that the Bank of Japan will continue to raise interest rates this year, unlike the other major central banks that have been lowering rates. The BoJ has been raising rates slowly but with inflation indicators moving upwards, even the cagey BOJ has signaled that it will continue to raise rates.
Japan’s CPI hit 3.2% in January, a 19-month high, and this week’s January inflation numbers are also pointing upward. The producer price index jumped to 3.1%, up from 2.9% in December. BoJ Core CPI climbed to 2.2% in January, up from 1.9% in December and its third consecutive acceleration. Next up is Tokyo Core CPI on Friday.
US consumer confidence takes a tumble
In the US, consumer confidence shocked with an unexpectedly weak report. The Conference Board consumer confidence index slipped to 98.3 in January, well below the revised December reading of 105.3 and shy of the market estimate of 102.5. The seven-point drop was the sharpest month-to-month decline since August 2021. The report found that more consumers are expecting a recession. Retail sales fell 0.9% m/m in December, the biggest decline in a year. If consumer data continues to deteriorate, the Federal Reserve will have to consider accelerating the pace of rate cuts.
USD/JPY Technical
- USD/JPY is testing resistance at 149.30. Above, there is resistance at 150.03
- There is support at 148.30 and 147.57
