Mitsubishi UFJ: Yen Supported by Expectations of Rate Hike in Japan

Mitsubishi UFJ Bank's Derek Halpenny believes that the latest inflation data in Japan will support the possibility of another interest rate hike later this year, thereby continuing to support the yen. Although market expectations for an interest rate hike by the Bank of Japan this year are not high, with central banks in other G-10 countries cutting interest rates, the prospect of a rate hike by the Bank of Japan appears unique. This will put pressure on the USD/JPY exchange rate, as market participants are increasingly believing that the Federal Reserve will further cut interest rates later this year. Japan's core inflation rate in April rose from 3.2% in March to 3.5%, higher than the survey's expected 3.4%. As a result, the US dollar fell by 0.5% to 143.332 yen.