USD/JPY: Dollar nears 150 yen ahead of key US inflation data

Dollar edges toward 150 yen threshold ahead of US inflation data that could alter Fed rate cut expectations and extend yen's slide.

Berto Tordecilla

Berto Tordecilla

The US dollar traded just shy of the 149.70 mark against the Japanese yen on Tuesday morning, flirting with the closely-watched 150 level as markets awaited the latest US consumer prices report.

With the Lunar New Year holidays keeping trading muted across parts of Asia, the focus centres on whether the inflation figures could impact expectations for the speed and extent of Federal Reserve interest rate cuts this year.

The yen has already declined over 5% versus the dollar in 2024 amid bets the Bank of Japan may lag behind other central banks in tightening monetary policy even if it exits negative rates. This has given yen bears fuel to sell the currency.

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According to analysts, if the dollar firmly breaches the symbolic 150 yen threshold, Japanese officials may resort to verbal warnings to try to halt another yen slide. For now, the currency remains under pressure from widening US-Japan yield differentials.

Recent resilient US jobs data has led markets to anticipate around 110 basis points of Fed rate reductions starting in May, a scaled-back outlook compared to December expectations for 160 bps of cuts. With volatility low, carry trade appetite has grown, also helping lift dollar/yen.

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