Forex News: Yen Falls As Tokyo Inflation Eases

Yen Falls As Tokyo Inflation Eases

(RTTNews) - The Japanese yen weakened against other major currencies in the Asian session on Friday, after data showed that the core inflation in Japan's capital weakened more-than-expected at the end of the year but it remained firmly above the central bank's 2 percent target.

The Bank of Japan may postpone its next interest rate hike, according to traders. Excluding fresh food, Tokyo inflation softened to 2.3 percent in December from 2.8 percent in November, the Ministry of Internal Affairs and Communications reported. The rate was also below economists' forecast of 2.5 percent.

At the same time, inflation excluding fresh food and fuel, slowed to 2.6 percent from 2.8 percent.

Overall, the Tokyo CPI moved up 2.0 percent from the prior year, following November's 2.7 percent gain.

Last week, the Bank of Japan raised its key interest rate by a quarter-point to 0.75 percent, the highest level in three decades, and also hinted at further rate hikes. The BoJ noted that the real interest rates are expected to remain significantly negative after the change in the policy rate.

Elsewhere, the Ministry of Economy, Trade and Industry said Japan's industrial production dropped 2.6 percent on a monthly basis in November, in contrast to the 1.5 percent rise seen in October. Output was forecast to drop 2.0 percent.

Year-on-year, industrial production was down 2.1 percent, reversing the 1.6 percent increase in October.

The ministry said, "Industrial Production fluctuates indecisively." The METI forecasts industrial production to grow 1.3 percent in December and 8 percent in January.

Another data from the METI showed that retail sales logged an annual growth of 1.0 percent after rising 1.7 percent in October. Nonetheless, the pace of increase was better than forecast of 0.9 percent.

Month-on-month, retail sales growth eased to 0.6 percent from 1.6 percent in the prior month.

In a communique, the Ministry of Internal Affairs and Communications reported that the unemployment rate remained unchanged at seasonally adjusted 2.6 percent in November.

The number of unemployed increased 70,000 from the previous year to 1.71 million.

Asian stocks traded higher in thin holiday trade, after the S&P 500 ended higher for a fifth day in a shortened session on Wednesday ahead of the Christmas and Boxing holidays.

Regional trading volumes remain thin, with several markets shut for holidays.

Precious metals like gold and silver hovered near record levels, driven by U.S. dollar weakness, escalating geopolitical tensions and expectations for two Federal Reserve rate cuts by the end of 2026.

In the Asian trading today, the yen depreciated to a record low of 198.58 against the Swiss franc, from an early high of 197.84. The next possible downside target for the yen is seen around the 199.00 region.

Against the euro, the pound and the U.S. dollar, the yen slipped to 3-day lows of 184.43, 211.42 and 156.49 from yesterday's closing quotes of 183.51, 210.70 and 155.80, respectively. If the yen extends its downtrend, it is likely to find support around 185.00 against the euro, 212.00 against the pound and 157.00 against the greenback.

Against the Australia and the Canadian dollars, the yen dropped to near 1-1/2-year lows of 104.99 and 113.88, respectively. On the downside, 105.00 against the aussie and 115.00 against the loonie are seen as the next support levels for the yen.

The yen slipped to more than a 1-year low of 91.32 against the NZ dollar, from Thursday's closing value of 91.04. The yen is likely to find support around the 92.00 region.

Looking ahead, U.S. Baker Hughes oil rig count data is due to be released in the New York session.

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