USD/JPY falls below 150 mark amid month-end flows and softening US inflation

The USD/JPY currency pair edged down to 149.59, retreating from its recent high of 150.78. This decline, influenced by month-end flows and the impact of a US core inflation report showing easing price pressures, has brought the pair below the significant 150 threshold.

Amid month-end flows, the yen had already shown signs of strengthening. The move gained momentum after the US core Personal Consumption Expenditure (PCE) data indicated a decrease, with the metric falling to 3.7% in September from 3.9% in the previous month. Jeffrey Roach, Chief Economist for LPL Financial in Charlotte, commented, “Core inflation continues to lose speed, aligning with the Fed’s anticipation of a slowdown in the coming months.”

The yield on the 10-year US Treasury remained relatively stable at 4.849% after briefly touching 5% earlier in the week. However, cautious market sentiments prevailed due to uncertainties surrounding the Federal Reserve’s upcoming interest rate setting meeting and escalating oil prices linked to geopolitical tensions.

Bank of America strategists noted that despite robust US economic growth in the third quarter, a slowdown toward the year’s end makes “a soft landing more likely than no landing.” They highlighted the importance of remaining vigilant in the face of evolving market conditions, stating, “Markets hope for smooth disinflation, but it should not be taken for granted.”

The Federal Reserve is widely expected to maintain its funds rate in a range of 5.25%-5.5% during its upcoming meeting. However, all eyes are on Federal Reserve Chair Jay Powell, whose comments on potential rate hikes in response to a strong economy and a tight job market could shape future market movements.