The Japanese yen fell in the Asian market on Wednesday against a basket of major and minor currencies, giving up its highest level in four weeks against the US dollar, as correction and profit-taking activity picked up, in addition to the continued recovery of the US currency ahead of key US inflation data.

Reports indicated that the Bank of Japan sees a chance to normalize monetary policy this year despite political developments in the country, which has boosted the likelihood of a Japanese interest rate hike before the end of the year.

Price Overview

Exchange rate of the Japanese yen today: The US dollar rose against the yen by about 0.15% to (147.58), from todays opening level at (147.41), recording the lowest at (147.24).

The yen ended Tuesdays trading up by less than 0.1% against the US dollar, its second gain in the last three days, recording the highest level in four weeks at 146.31 yen, supported by hopes of a Japanese interest rate hike.

US Dollar

The dollar index rose on Wednesday by 0.2%, extending gains for the second consecutive session, as the recovery from a seven-week low continues, reflecting the rebound of the US currency against a basket of global currencies.

In addition to buying from lower levels, the US dollars rebound comes ahead of the release of key US inflation data, which will provide decisive evidence on the likelihood of US interest rate cuts in September and October.

Later today, producer price data for August will be released, followed by consumer price data on Thursday. Additional hot data would reduce the likelihood of US interest rate cuts.

Japanese Interest Rates

Reports suggest the Bank of Japan sees a chance to raise interest rates this year despite the countrys political developments.

Following the above reports, market pricing of a 25-basis-point interest rate hike by the Bank of Japan at the September meeting rose from 30% to 35%.

Traders currently expect Japanese interest rates to reach the 0.75% range before year-end, implying strong odds of an additional 25-basis-point increase during the remainder of this year.

To reprice those odds, investors are awaiting more data on inflation, unemployment, and wages in Japan, as well as remarks from some Bank of Japan members.