USD/JPY slides further to 156.00 on firm BoJ rate-hike bets

• USD/JPY weakens to 156.00 as BoJ rate-hike bets surge.
• The BoJ is expected to raise interest rates further by 10 bps as inflation remains above 2%.
• Investors await the US data for fresh guidance on interest rates.

The USD/JPY pair tumbles to near 156.00 in Tuesday’s American session. The asset weakens as the Japanese Yen (JPY) strengthens amid expectations that the Bank of Japan (BoJ) will tighten its monetary policy further in its July monetary policy meeting.

Economists expect that the BoJ will raise interest rates further by 10 basis points (bps). The expectations for the BoJ to hike borrowing rates further are prompted by steady inflation above bank’s target of 2%. In June, annual National Consumer Price Index (CPI) rose steadily by 2.8%.

The core CPI, which excludes volatile food and energy items, accelerated to 2.2% from the former release of 2.1%. National CPI, excluding Fresh Food, grew slower by 2.6% from the estimates of 2.7% but remained higher than the former release of 2.5%.

BoJ policymakers remain worried about rising inflation due to the weak Japanese Yen. Weak yen has resulted in higher exports making them more competitive in global markets.

Meanwhile, the appeal of the US Dollar (USD) improves as a safe haven due to increasing risk aversion. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, rises to near 104.50.

This week, investors will focus on the United States (US) Q2 Gross Domestic Product (GDP) and the Personal Consumption Expenditure Price Index (PCE) data for June. The economic data will provide cues about when the Federal Reserve (Fed) will begin reducing interest rates.

(The story was corrected on July 23 at 13:20 GMT to say in the first bullet that "USD/JPY weakens to 156.00 as BoJ rate-hike bets surge", not rate-cut bets.)