USD/JPY Nosedives—Can Bulls Prevent a Bigger Collapse?

Japan's core consumer inflation hit 3.2% in January for its fastest pace in 19 months, data showed on Friday, reinforcing expectations that the central bank will keep raising interest rates from levels still seen as low.

Bond yields rose on the data, as markets factor in the chance that the Bank of Japan (BOJ) could hike interest rates more aggressively than initially thought, as inflationary pressure mounts.

The year-on-year increase in the core consumer price index (CPI), which excludes fresh food prices, slightly exceeded a median market forecast for a gain of 3.1% and followed December's rise of 3.0%.

"While services inflation isn't accelerating that much, goods inflation isn't slowing either," said Ryosuke Katagi, market economist at Mizuho Securities.

"The BOJ will likely see scope to raise interest rates, on the view price conditions are moving in line with its forecast."

A separate index stripping out costs of both fresh food and fuel, which is closely watched by the BOJ as a better gauge of demand-driven inflation, rose 2.5% in January from a year earlier, the data showed.

It was the fastest year-on-year pace since March 2024, when the index rose 2.9%.

The two-year Japanese government bond (JGB) yield rose 1.0 basis point (bps) from Wednesday to stand at 0.830% after the data, for its highest level since October 2008.

For nearly three years, inflation has exceeded the central bank's target of 2%, underlining rising inflationary pressure that has prompted hawkish remarks from BOJ policymakers, such as Wednesday's comments by board member Hajime Takata.

The BOJ raised its short-term interest rate to 0.5%, from 0.25% in January, reflecting its conviction that Japan was making progress in sustainably achieving its inflation target of 2%.

BOJ governor Kazuo Ueda has signalled his readiness to keep raising rates if wages continue to increase and underpin consumption, thereby allowing firms to keep hiking pay.

The BOJ has said solid wage growth will prod service-sector firms to pass on rising labour costs, and replace rising raw material prices as the key driver of inflation in Japan.

But stubbornly high prices of fuel and food throw into doubt the chance that cost-push pressure will dissipate. In January, households still battled soaring prices of rice, vegetables and other food, as well as a 10.8% hike in energy costs.

Headline consumer inflation, including fresh food prices, hit 4.0% in January, accelerating from 3.6% the previous month, and standing at their highest in two years.

By contrast, services inflation rose 1.4% in January from the previous year, slowing from a gain of 1.6% in December, the CPI data showed.

Japan's economy expanded an annualised 2.8% in the final quarter of last year on robust business expenditure and consumption, shoring up the BOJ's case for more rate hikes.

A majority of economists polled by Reuters expect the BOJ to hike rates once more this year, most probably during the third quarter, to 0.75%.

Source: Theedgemarkets

WTI struggles to capitalize on a four-day-old recovery from the YTD trough touched this week. 

Hopes for a solid US fuel demand and concerns over supply disruptions in Russia lend support.

The mixed fundamental backdrop warrants caution before placing aggressive directional bets.

West Texas Intermediate (WTI) US Crude Oil prices oscillate in a narrow trading range band during the Asian session on Friday and consolidate gains registered over the past four days. The commodity currently trades around the $72.40 region, below a one-week high touched on Thursday, and seems poised to snap a four-week losing streak.

The Energy Information Administration reported on Thursday that US Crude Oil stockpiles rose, while gasoline and distillate inventories fell last week. This, along with concerns over supply disruptions in Russia, acts as a tailwind for the black liquid. In fact, hopes for a peace deal between Russia and Ukraine seem to have faded in the wake of intensifying Ukrainian drone attacks on Russian Oil pumping stations. 

Apart from this, the recent US Dollar (USD) slump to the lowest level since December 10, which tends to underpin the USD-denominated commodities, lends additional support to Crude Oil prices. However, worries that US President Donald Trump's trade tariffs could weaken the global economy and dent fuel demand hold back traders from placing aggressive bullish bets and contribute to capping the black liquid. 

Furthermore, signs of slowing demand from the Eurozone and China warrant some caution before positioning for an extension of a modest recovery from the year-to-date low, around the $70.15 region touched earlier this week. Traders now look forward to the release of global flash PMIs, which might provide a fresh insight into the economic health and produce short-term trading opportunities around Crude Oil prices.

Source: FXSTREET

GBP/USD reached a two-month high at 1.2674 as the US Dollar struggled amid weak jobless claims data.

US Initial Jobless Claims increased to 219,000 in the previous week, surpassing the expected 215,000.

Traders remain cautious due to ongoing concerns about the UK’s economic outlook.

GBP/USD edged lower after hitting a two-month high of 1.2674 on Friday, trading around 1.2670 at the time of writing during the Asian session. However, the pair gained ground as the US Dollar (USD) struggled amid weak jobless claims data and mixed signals from the Federal Reserve (Fed).

US Initial Jobless Claims for the week ending February 14 increased to 219,000, surpassing the expected 215,000. Continuing Jobless Claims also rose slightly to 1.869 million, just under the forecast of 1.87 million.

Additionally, the GBP/USD pair saw gains amid improved market sentiment after US President Donald Trump announced potential progress in trade negotiations with China, easing market concerns over tariffs.

Fed Governor Adriana Kugler noted on Thursday that US inflation still has "some way to go" before reaching the 2% target, acknowledging uncertainty ahead, according to Reuters.

Meanwhile, St. Louis Fed President Alberto Musalem highlighted the potential risks of stagflation and rising inflation expectations. Atlanta Fed President Raphael Bostic kept the door open for two rate cuts this year, depending on economic conditions.

Traders remain cautious due to ongoing concerns about the UK’s economic outlook. Bank of England (BoE) Governor Andrew Bailey warned this week that economic growth is expected to remain sluggish, with a softening labor market.

The Pound Sterling (GBP) tried to gain traction after a hotter-than-expected UK Consumer Price Index (CPI) report for January released on Wednesday. Governor Bailey had already indicated that a short-term inflation spike, driven by volatile energy prices, wouldn’t be persistent.

British Pound PRICE Today

The table below shows the percentage change of British Pound (GBP) against listed major currencies today. British Pound was the strongest against the Japanese Yen.

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the British Pound from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent GBP (base)/USD (quote).

Source: FXSTREET

The Japanese Yen weakened after Japan's Finance Minister Katsunobu Kato’s comments on Friday.

Japan’s strong National CPI print reaffirms BoJ rate hike bets and should limit losses for the JPY.

The underlying USD bearish sentiment might also contribute to keeping a lid on the USD/JPY pair. 

The Japanese Yen (JPY) attracts some sellers on Friday in reaction to comments from Japan's Finance Minister, Katsunobu Kato, saying that higher long-term rates can pressure Japan's fiscal situation. This assists the USD/JPY pair to stage a modest bounce from the 149.30-149.25 region, or its lowest level since December 3 touched during the Asian session. However, any meaningful JPY depreciation still seems elusive in the wake of the growing acceptance that the Bank of Japan (BoJ) would hike interest rates further.

Hawkish BoJ expectations were reaffirmed by Japan's strong National Consumer Price Index (CPI) print and remain supportive of elevated Japanese government bond (JGB) yields. The resultant narrowing of the rate differential between Japan and other countries should continue to underpin the lower-yielding JPY. Apart from this, the recent US Dollar (USD) fall, amid concerns about the US consumer health and despite bets for an extended pause on rates by the Federal Reserve (Fed), might cap the USD/JPY pair. 

Japanese Yen drifts lower amid talks of intervention to curb further rise in JGB yields

Japan's Finance Minister, Katsunobu Kato, warned this Friday that higher Japanese government bond yields will increase debt-servicing costs, which, in turn, may impact Japan's finances. This overshadows the stronger-than-expected release of Japan's National Consumer Price Index (CPI) and prompts some intraday selling around the Japanese Yen.

BoJ Governor Kazuo Ueda noted that a rise in long-term interest rates will push up corporate funding costs, but also need to take into account how the improving economy will underpin their profits. If markets make abnormal moves, we stand ready to respond nimbly, such as through market operations to smooth market moves, Ueda added further. 

The latest data released by the Statistics Bureau of Japan showed that the headline National CPI climbed to a two-year high of 4.0% YoY in January from 3.6% in the previous month. Meanwhile, the Core CPI, which excludes volatile fresh food items, grew 3.2% from the previous year, compared to 3.0% recorded in December and touching a 19-month high. 

Furthermore, a core CPI reading that excludes both fresh food and fuel costs rose 2.5% in January from a year earlier, marking the fastest pace since March 2024. The data underscores rising inflationary pressure in Japan that has drawn hawkish remarks from several BoJ policymakers, which, in turn, should limit any meaningful depreciating move for the JPY. 

Moreover, expectations that sustained wage gains could spur consumer spending suggest that the BoJ could hike interest rates more aggressively than initially thought. This keeps the benchmark 10-year JGB yield elevated near its highest level since November 2009 and should continue to act as a tailwind for the lower-yielding JPY in the near term.

A private-sector survey showed that Japan's factory activity extended declines for an eighth straight month in February but at a slower pace. The au Jibun Bank Japan flash Manufacturing Purchasing Managers' Index (PMI) rebounded to 48.9 from a 10-month low of 48.7 in January. In contrast, the gauge for the services sector improved to 53.1 from 53.0.

The US Dollar touched its lowest level since December 10 on Thursday as a softer-than-anticipated sales forecast from Walmart raised doubt over US consumer health. This comes on top of worries that US President Donald Trump's tariff plans and protectionist policies would boost inflation, which could further dent consumer spending. 

Meanwhile, Federal Reserve officials remain wary of future interest rate cuts amid sticky inflation and the uncertainty over Trump's policy moves. In fact, St. Louis Fed President Alberto Musalem warned on Thursday that rising inflation expectations combined with the risk of stubborn stagflation could create a double challenge for the US economy.

Earlier, Fed Board Governor Adriana Kugler said that US inflation still has some way to go to reach the 2% target and that its path toward that goal continues to be bumpy. However, Atlanta Fed president Raphael Bostic struck a dovish tone and sees room for two more rate cuts this year, though much depends on the evolving economic conditions.

Traders now look forward to the release of flash US PMIs for fresh insight into the economic health. Friday's US economic docket also features the Existing Home Sales data and the revised Michigan Consumer Sentiment Index. This, along with speeches from FOMC members will drive the USD demand and provide some impetus to the USD/JPY pair. 

USD/JPY is likely to attract fresh sellers and remain capped near the 150.90-151.00 area

From a technical perspective, the overnight breakdown through the 151.00-150.90 horizontal support and a subsequent fall below the 150.00 psychological mark was seen as a fresh trigger for bearish traders. Moreover, oscillators on the daily chart are holding deep in negative territory and are still away from being in the oversold zone. This, in turn, suggests that the path of least resistance for the USD/JPY pair is to the downside and any further move up could be seen as a selling opportunity near the 151.00 round figure. 

Some follow-through buying, however, could trigger a short-covering rally and lift the USD/JPY pair to the 151.40 hurdle en route to the 152.00 round-figure mark. The recovery momentum, however, runs the risk of fizzling out rather quickly near the 152.65 area. The said barrier represents the very important 200-day Simple Moving Average (SMA), which if cleared decisively might shift the near-term bias in favor of bullish traders.

On the flip side, the 150.00 mark now seems to act as an immediate support ahead of the 149.30-149.25 region, or a multi-month low touched during the Asian session. This is closely followed by the 149.00 mark, below which the USD/JPY pair could slide further towards testing the December 2024 swing low, around the 148.65 region.

Source: FXSTREET

Bank of Korea Gov. Rhee Chang-yong speaks in this Feb. 18 photo. 

The Korean central bank is widely expected to lower its policy rate by 0.25 percentage point next week in an effort to prop up the economy, a poll showed Friday.

According to a survey conducted by Yonhap Infomax, the financial news arm of Yonhap News Agency, 20 out of 21 local analysts and experts polled predicted the Bank of Korea (BOK) will cut its base rate to 2.75 percent from the current 3 percent at its next rate-setting meeting slated for Tuesday.

In January, the BOK kept its benchmark interest rate frozen in the wake of the weak local currency amid political chaos and uncertainties stemming from U.S. President Donald Trump's new administration.

The on-hold decision came on the heels of two rate cuts in the October and November meetings.

"The country is facing growing downside risks centering on weak domestic demand, while the won's further weakness seems limited, which would lead the BOK to lower the policy rate by 25 basis points," said Kim Seon-tae, an expert from KB Kookmin Bank.

Nineteen out of the 21 analysts polled anticipated the key rate to be lowered to 2.5 percent in the first half of this year.

The central bank is scheduled to present an adjusted growth forecast Tuesday. BOK Gov. Rhee Chang-yong has hinted at slashing the outlook to around 1.6 percent from its previous forecast of a 1.9 percent expansion.

Korea's potential growth rate is at 2 percent, and this year may mark the first time ever that the country's yearly growth rate falls below the level. 

Source: Koreatimes

The Indian Rupee gathers strength in Friday’s Asian session. 

Significant US Dollar sales and easing concerns on trade tensions underpin the INR. 

The preliminary Indian and US PMI reports for February will be the highlights later on Friday. 

The Indian Rupee (INR) gains ground on Friday after reaching a one-week high in the previous session. The massive US Dollar (USD) sales by foreign banks provide some support to the local currency. US President Donald Trump's optimistic comments on a fresh trade deal with China, not only lift the Chinese Yuan but also boost the INR. Any significant depreciation of the Indian Rupee might be limited amid the likely intervention by the Reserve Bank of India (RBI). 

Nonetheless, Foreign Portfolio Investment (FPI) outflows and the renewed Greenback demand could weigh on the local currency. The recovery in crude oil prices might also contribute to the INR’s downside as India is the world's third-largest oil consumer. 

Traders await the advanced India’s HSBC Purchasing Managers Index (PMI) report for February, which is due later on Friday. On the US docket, the S&P Global PMI, Existing Home Sales and Michigan Consumer Sentiment Index report will be released. Also, the Federal Reserve’s (Fed) Mary Daly and Philip Jefferson are set to speak on the same day. 

Indian Rupee strengthens amid easing trade tensions

India's growth is estimated to slow to 6.4% in 2025 from 6.6% in 2024, as new US tariffs and softening global demand weigh on exports, said Moody's Analytics on Thursday. 

US President Donald Trump said on Wednesday he will announce fresh tariffs within the next month, adding lumber and forest products to previously announced plans to impose duties on imported cars, semiconductors and pharmaceuticals. 

The US Initial Jobless Claims for the week ending February 15 rose to 219,000, compared to the previous week's 214,000 (revised from 213,000), according to the US Department of Labor (DoL) on Thursday. This figure came in above the market consensus of 215K.

Fed Board Governor Adriana Kugler said late Thursday that US inflation still has "some way to go" to reach the central bank's 2% target and that its path toward that goal continues to be bumpy. 

St. Louis Fed President Alberto Musalem said the risk of inflation could remain high, adding that he needs confidence that inflation is waning to support more rate cuts. 

USD/INR bulls take a breather 

The Indian Rupee trades on a stronger note on the day. The USD/INR pair paints the positive picture on the daily chart, with the price holding above the key 100-day Exponential Moving Average (EMA). However, further consolidation or downside cannot be ruled out as the 14-day Relative Strength Index (RSI) stands below the midline near 48.0. 

The immediate resistance level for USD/INR emerges at the 87.00 psychological level. Bullish candlesticks and sustained trading above this level could set its sights on an all-time high near 88.00, en route to 88.50. 

On the flip side, if the pair can’t hold the line at 86.35, the low of February 12, a drop toward 86.14, the low of January 27, could be on the cards. The next contention level to watch is 85.65, the low of January 7. 

Source: FXSTREET