The greenback rallied against the yen yesterday following the release of better-than-anticipated consumer price index data for September. Japan’s bank lending and PPI data were also better than expected. However, solid US inflation data encouraged the market to bet on further steep rate hikes by the Fed. As interest rate hikes are directly correlated to the strength of a currency, the greenback surged against the yen and other rivals. Overall, the USD/JPY pair rallied from a low of 146.50 to a high of 147.68 in the last 24 hours.
According to the Bank of Japan, the country’s lending grew by 2.30% y-o-y in September, following a rise of 1.90% in the prior month and greater than the 2% increase anticipated by economists. The reported figure reflects the quickest rate of growth since May 2021, as enterprises stepped up borrowing to meet the demand for corporate and real estate dealings, and also to manage surging raw material expenses, and take care of additional expenses pertaining to the reopening of economic activities.
Overall, outstanding loans held by Japan’s “shinkin” major and regional banks were ¥590.54 trillion. The key drivers of loan growth were major and regional banks, posting a rise of 2.40% and 2.80%, respectively, while lending in “shinkin” banks grew slightly by 0.30%.
In a separate news release, the Bank of Japan stated that the producer price index surged 9.70% y-o-y in September, following a 9.40% growth in August, and pleased economists who were expecting the producer price index to rise by only 8.90%. The reported figure reflects the 19th successive month of producer inflation and the highest level since April, against the backdrop of rising commodity prices and a weakening yen.
Transport equipment recorded an increase of 3.90% in September, following a rise of 3.80% in the prior month. Beverages and foods rose by 6.40%. Chemicals recorded an increase of 10.40% Petroleum & coal surged by 14.70%. Likewise, iron & steel jumped by 26.10%. While electrical machinery grew by 2.90%, production machinery rose by 4.50%. Metal products surged 12.30%. Non-ferrous metals and general-purpose machinery increased by 11.80% and 2.70%, respectively.
On a m-o-m basis, producer prices rose by 0.70% in September, following a 0.40% increase in August.
In the US, the Bureau of Labor Statistics stated that the country’s consumer price index grew by 0.40% m-o-m in September, following a 0.10% increase in the prior month, and twice the 0.20% rise anticipated by economists.
Shelter, food, and medical care indexes recorded the largest increase. The growth was partly negated by a 4.90% drop in the gasoline index. The food index rose by 0.80% m-o-m in September. However, the energy index declined by 2.10% m-o-m.
On a year-over-year basis, the consumer price index grew by 8.20% y-o-y in September, following an 8.30% rise in the prior month, and surpassed forecasts of an 8.10% increase.
The Bureau of Labor Statistics stated that devoid of food and energy, the country’s core CPI grew by 0.60% m-o-m in September, matching the increase in August. Economists had anticipated a 0.40% rise in September.
On a year-over-year basis, the core CPI surged 6.60% in September. The energy index rose by 19.80% while the food index jumped by 11.20%.
According to the Department of Labor, US unemployment claims slightly increased to 228,000 in the week ended October 8, from 219,000 in the prior week. The four-week moving average stood at 211,500, up 5,000 from the earlier week’s average of 206,500.
The upbeat US consumer price index data is expected to keep the USD/JPY pair slightly bullish against the yen in the short term.
The historical price chart indicates that the USD/JPY pair is rising after testing the support at 144.85. The next resistance is anticipated only near 148. Additionally, the currency pair is trading above its 50-day moving average while the stochastics indicator is in the bullish zone. Therefore, we anticipate the currency pair to remain in an uptrend in the days ahead.
Disclaimer: Any financial trading analysis offered here is our opinion and is not intended as advice or direction for investors. We cannot guarantee the success of any trades made as a consequence of this article, and we encourage traders to incorporate a strong money management strategy to limit losses when they enter the markets. Please use this article as part of your own research before formulating strategies prior to trading.
