The USD/JPY pair continued to rise, reaching around 156.55 in early Asian trading on Wednesday. This increase was supported by speculation that the Fed may keep interest rates higher for a longer period due to ongoing inflation concerns. However, the possibility of Japanese authorities intervening in the foreign exchange market could limit the pair’s gains.
Fed Chair Jerome Powell recently stated that inflation is not slowing down as quickly as anticipated, with the April Producer Price Index figures indicating a need to maintain higher rates. Despite this, Powell clarified that the Fed is not planning to raise rates at this time. Optimistic comments from Fed officials could strengthen the US Dollar and help boost USD/JPY.
Data released by the Bureau of Labor Statistics showed a 2.2% year-on-year increase in the Producer Price Index for April, with the Core PPI (excluding food and energy prices) also rising. Investors will be watching for the upcoming US Consumer Price Index and Retail Sales reports for insights into the Fed’s future rate adjustment plans.
On the Japanese side, Finance Minister Shunichi Suzuki announced that the government will collaborate closely with the Bank of Japan regarding the foreign exchange market and will take necessary measures if needed. Concerns about potential intervention by Japanese authorities could provide some support for the Japanese Yen and restrict the pair’s upward movement.