USD/JPY tumbles to near 157.00 as Yen strengthens after BoJ Ueda’s hawkish remarks

• USD/JPY slumps to near 157.00 as BoJ Ueda’s hawkish remarks improve the appeal of the Japanese Yen.
• BoJ Ueda keeps the offer of raising interest rates in the policy meeting on January 23-24 on the table.
• The next move in the USD will be influenced by the US inflation data for December.

The USD/JPY pair falls sharply to near 157.00 in Wednesday’s European session. The asset dives vertically as the Japanese Yen (JPY) strengthens after hawkish remarks from Bank of Japan (BoJ) Governor Kazuo Ueda on Wednesday.

Kazuo Ueda kept the possibility of an interest rate hike in the policy meeting on January 23-24 on the table. Ueda said that the central bank is currently “analysing data thoroughly” and will compile the findings in the quarterly outlook report, and on based on that the bank will discuss whether to “raise interest rates at next week's policy meeting”.

On the wage growth outlook, Ueda said that there was a lot of “positive talk on the wage outlook" when he met BoJ's regional branch managers last week.

Meanwhile, a sharp sell-off in the asset is also driven by a slight decline in the US Dollar (USD) ahead of the US Consumer Price Index (CPI) data for December, which will be published at 13:30 GMT. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, drops to near 109.00.

Investors will keep a close eye on the US inflation data as it will influence market expectations for the Federal Reserve’s (Fed) monetary policy outlook. Year-on-year headline inflation is expected to have accelerated to 2.9% from 2.7% in November, with core reading – which excludes volatile food and energy prices – growing steadily by 3.3%. According to the CME FedWatch tool, traders expect the Fed to cut interest rates only once this year.