USD/JPY: Dollar Hits Fresh 7-Month High Against Yen as BOJ Lacks Rate-Hike Timing

Staying true to itself, the Bank of Japan was once again tight-lipped on any future rate hikes, failing to support the yen’s value.

• The USDJPY pair advanced further to the upside early Wednesday, extending its swing to the third day in a row. The US dollar peaked this morning to a seven-month high of ¥158.40 before coming down a bit to trade near the ¥158.00 threshold. Once again it seems that the stars have aligned for the dollar-yen bulls — US inflation appears to be creeping up, boosting the dollar, and the Bank of Japan is staying put on interest rates, knocking the yen.
• In Japan, central bank boss Kazuo Ueda said in a press conference earlier this week that officials are looking to raise interest rates further only if the economy allows it. In other words, things should keep improving. Lower interest rates generally boost economic growth as businesses and consumers are encouraged to borrow and spend, improving liquidity and overall wellbeing. But this has its risks, too, like inflation flaring up, which has happened already.
• Stateside, the latest inflation data jolted the forex markets and gave the US dollar a friendly nudge. Price growth in the services sector climbed to 64.4 in December, up from 58.2 in November and above consensus calls for 57.5. Now markets are shifting their attention to the looming Fed minutes later today. After that, the focus will be on Friday’s jobs data. Both events are likely to stir the forex space, offering some nice trading opportunities.