The Japanese Yen (JPY) edges lower against its American counterpart during the Asian session on Tuesday after data showed that consumer inflation in Tokyo – Japan's capital city – eased more than expected in November. In fact, Tokyo's core CPI, which excludes volatile items such as fresh food, was the closest to the Bank of Japan's (BoJ) 2% annual target since June 2022. This comes on top of the recent less-hawkish remarks by BoJ board members, downplaying the chance of an imminent shift in the policy stance and ending the negative interest rate regime, which turns out to be a key factor undermining the JPY.
Investors, however, seem convinced that the BoJ will eventually begin tightening its ultra-loose policy and end its yield curve control measures during the first few months of 2024. This, along with a softer risk tone, underpins the safe-haven JPY. The US Dollar (USD), on the other hand, struggles to capitalize on the previous day's move up to over a one-week peak amid growing acceptance that the Federal Reserve (Fed) is done with its policy-tightening campaign and will soon start cutting interest rates. This, in turn, keeps a lid on the USD/JPY pair's recovery from a near three-month low touched on Monday.
Investors, however, seem convinced that the BoJ will eventually begin tightening its ultra-loose policy and end its yield curve control measures during the first few months of 2024. This, along with a softer risk tone, underpins the safe-haven JPY. The US Dollar (USD), on the other hand, struggles to capitalize on the previous day's move up to over a one-week peak amid growing acceptance that the Federal Reserve (Fed) is done with its policy-tightening campaign and will soon start cutting interest rates. This, in turn, keeps a lid on the USD/JPY pair's recovery from a near three-month low touched on Monday.
