Here’s one really cool thing the Japanese Yen has done against the New Zealand Dollar. This week’s out-sized inflation data in Japan and the United States is controlling the market moves, confirming the Yen as the strong currency in this pair. The Bank of Japan (BoJ) is preparing to start debating interest rate increases. This decision follows hot on the heels of last week’s surprise Tokyo inflation print. At one point during the North American session on Friday, the USD/JPY pair plummeted over 0.3%. It continued to find support around the 150.50 level.
Tokyo’s Consumer Price Index (CPI) data just came out and showed a big jump. This was after a 2.9% 12-month increase through March. This growth surpassed the previous month’s figure of 2.8%, suggesting an accelerating trend in inflation within Japan’s capital. Bigger, more general capitals CPI data still revealed a quicker acceleration. It increased 2.4%, beating both forecasts and the last advance release of 2.2%.
Reading for the United States core Personal Consumption Expenditure (PCE) Inflation. This figure strips out the more volatile food and energy prices. The PCE Inflation came in 2.8%, up year-on-year, above both the forecast and prior release of 2.7%. Such data is likely to influence the Federal Reserve’s monetary policy, with expectations mounting that borrowing rates may remain unchanged for a prolonged period.
The convergence of exceptionally hot inflation data out of Japan and the US has produced a difficult discplinary cocktail for currency traders. The USD/JPY pair is keeping to the defensive territory even after a hotter-than-expected US core PCE inflation data for February. Market participants are closely watching how these inflation trends will impact monetary policy decisions on both sides of the Pacific.
The BoJ’s expected interest rate increase is in part a reaction to Japan’s new inflationary trends, most notably reflected in the Consumer Price Index (CPI) for Tokyo. To add to the Yen’s strength, we can expect the BOJ’s move to put additional upward pressure on the Yen against all other currencies, including the NZD. The Yen’s recent performance has been notably robust, reflecting investor confidence in Japan’s economic outlook amidst global inflationary pressures.