Japan’s yen fell to a 24-year low against the US dollar on Thursday after news of searing US inflation shortened the odds on a 100-basis-point interest rate hike at next month’s Federal Reserve policy meeting.
With market already braced for the shockwave, data showed US consumer prices increased more than expected in September as underlying inflation pressures continue to escalate, making it ever more likely that the Fed will at least deliver another 75-basis-point (bps) rate increase.
The dollar rose as high as 147.57 yen, the highest since August 1998. It was last up 0.4% at 147.49 yen.
Also on AF: China Needs Extra $17tn to Reach Net Zero by 2060: World Bank
The consumer price index rose 0.4% last month after gaining 0.1% in August, the Labor Department revealed. Economists had forecast the CPI climbing 0.2%. In the 12 months through September, the CPI increased 8.2% after rising 8.3% in August.
“Anybody who says [the Fed could] pivot is wishful thinking right now. The Fed has got to get a handle on inflation right now,” said Arthur Laffer, president of Laffer Tengler Investments in Nashville, Tennessee.
“A soft landing is also becoming wishful thinking the more they raise rates. We’re going to have a really soft, maybe even negative fourth quarter.”
Following the data, fed funds futures have now priced in a 13% chance of a 100-bps rate hike.
Traders remained on the lookout for signals of Japanese intervention to prop up the struggling yen. Officials reiterated this week that they stand ready to take appropriate steps to counter excessive currency moves, though whether they wish to defend particular levels remains unclear.
- Reuters with additional editing by Sean O’Meara
Read more:
Japan Warns on Yen Sell-Off as Dollar’s Surge Continues
Japan Banks on Tourism Boost From Weak Yen as Borders Reopen
