Ella 
On Wednesday, the yen fell to its weakest level against the dollar since July 1990, following stronger-than-expected U.S. consumer inflation data. The data pushed back market expectations for the timing of the Fed’s first rate cut from June to September. In addition, minutes from the last Fed meeting showed that officials were concerned that inflation was slowing and they might have to keep interest rates higher for longer. This is in huge contrast with the Bank of Japan’s (BoJ) cautious attitude towards further tightening policy, indicating that the spread between U.S. and Japanese bond yields will continue to widen, putting heavy pressure on the yen.
Meanwhile, expectations that the Federal Reserve will keep interest rates higher for a longer period triggered a plunge in U.S. stocks overnight. That, coupled with a barrage of verbal warnings from Japanese officials that they would intervene in markets to support the currency, helped the safe-haven yen attract some buyers in Asia on Thursday. However, the yen still appears to be struggling to achieve significant appreciation, so caution should be exercised before confirming a near-term top in USD/JPY. The focus turns to the number of initial jobless claims in the United States last week. This data, together with the U.S. Producer Price Index (PPI) and the Fed’s speech, will drive demand for the dollar and constitute short-term trading opportunities for USD/JPY.
