Analyst: If Japanese inflation data boosts interest rate bets, the yen could appreciate further

The yen has reached a 10-week high against the US dollar, according to Chris Turner, an analyst at ING Bank. In a report, he stated that if upcoming inflation data supports market expectations for further interest rate hikes by the Bank of Japan, the yen could strengthen even more. Data shows that the market expects a higher likelihood of a rate hike by the Bank of Japan in July, but not fully factoring in an expectation of a 25 basis point increase until September. Turner said it is surprising how strongly the yen has reacted to these "relatively mild interest rate changes". However, despite Japanese inflation data potentially pushing USD/JPY lower in the short term, it is not expected that USD/JPY exchange rates will fall significantly.