- USD / JPY lost its traction early in the American session on Tuesday.
- The US dollar index turned negative on the day below 92.50.
- Core CPI inflation in the US rose less than expected in August.
After spending the first half of the day moving sideways above 110.00, the pair USD/JPY it lost its traction early in the American session and was last seen losing 0.1% on the day at 109.88.
USD struggles to find demand after inflation report
Renewed selling pressure surrounding the dollar appears to be the main driver of USD / JPY weakness. After data released by the US Bureau of Labor Statistics showed that the annual Core Consumer Price Index (CPI) declined to 4% in August from 4.3% in July, the US Dollar Index .UU. (DXY) turned south. At time of writing, the DXY was down 0.3% to 92.33.
Additionally, the benchmark 10-year US Treasury yield, which gained as much as 1% earlier in the day, is now losing 0.7%, putting additional weight on the USD’s shoulders. / JPY.
Commenting on the CPI figures, “the release came eight days before the Federal Reserve announced its decision and consolidates a” no phasing out “announcement, said FXStreet analyst Yohay Elam.” Fed Chairman Jerome Powell had already indicated that he is in no rush to cut the Fed’s $ 120 billion monthly bond purchase plan in his Jackson Hole speech. The reduction may have to wait longer. “
Meanwhile, US stock index futures started to rise following US inflation data, suggesting that the major Wall Street indices are likely to open in positive territory. Should risk flows start to dominate financial markets, the USD could struggle to rebound and cause USD / JPY to end the day in negative territory.