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USD/JPY hovers around 153.00, the highest level since July 1990, eyes on intervention risks

  • USD/JPY trades softer to 153.00 after reaching the July 1990 tops on Thursday. 
  • The US CPI inflation rose more than expected in March, triggering the Fed to delay rate cuts this year. 
  • The potential FX intervention from the BoJ might provide some support to the JPY. 

The USD/JPY pair trades on a weaker note near 153.00 after retreating from the highest level since July 1990, nearly 153.24, on Thursday during the early Asian session. The uptick of the pair is supported by the upbeat US Consumer Price Index (CPI) data for March, which triggered investors to scale back bets on US interest rate cuts this year.

The US CPI inflation rose more than expected in March. The headline CPI figure rose 0.4% MoM in March, compared with the 0.3% increase expected. On a year-on-year basis, the CPI increased 3.5% YoY versus forecasts of a 3.4% rise, the Labor Department reported on Wednesday. 

The Core CPI figure, excluding the volatile food and energy components, grew 0.4% MoM in March, compared with expectations of a 0.3% advance. Annually, the figure rose 3.8%, versus the expectation of a 3.7% increase. Following the CPI report, investors lowered their bets that the Federal Reserve (Fed) would cut interest rates in June to 17%, from 57% before the release of the data, according to the CME’s FedWatch tool.

Additionally, Minutes of the last Fed meeting suggested that participants were worried about the persistence of elevated inflation and the recent data did not help the US central bank to gain confidence that inflation moved sustainably towards the 2% target. The officials emphasized the need to keep interest rates higher for longer, which boosts the Greenback and acts as a tailwind for the USD/JPY pair. 

On the other hand, the Japanese Yen (JPY) has faced some selling pressure near a multi-decade low amid the Bank of Japan’s (BoJ) cautious approach and uncertainties for future rate hikes. However, the possibility that the Japanese authorities will intervene in the foreign exchange (FX) market might support the JPY and cap the upside of the pair.