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ForexLive Asia-Pacific FX news wrap: Japan ‘wholesale’ inflation highest in 16 months

The
yen strengthened during the session here today, dropping from US
afternoon highs above 152.00 to lows towards 151.40. Fingers were
pointed at ‘wholesale’ inflation data. The
PPI data from Japan for November was published by the Bank of Japan.
It showed that inflation
in Japan’s corporate goods prices accelerated to the fastest pace
in 16 months. This
ratcheting higher of price pressures argues, at the margin, for
further BoJ policy normalisation, including rate hikes.

As
an aside there was also a report in Japanese media of a 4% corporate
tax surcharge to fund defence spending. There were some
extrapolations made that if Japan is to fund more of their own
defence (which seems not unreasonable under the incoming Trump
administration) they may sell some of their US government bond
holdings to generate some cash (and buy yen in the process to bring
the funds home). This may have been a factor in the yen bid, but I’d
not be getting too gung-ho on this immediately.

There
was other data from Japan today, Reuters Tankan and Japan’s
Ministry of Finance Business Outlook survey (see bullets above for
details on both) but these are generally not immediate FX market
movers.

The
Indian
central bank, the
Reserve Bank of India, was
likely intervening
today, selling
US
dollars
to limit rupee depreciation.

Major
FX traded in limited ranges (except for JPY) ahead of the US CPI data
due at 0830 US Eastern time today. As a heads up, Andrew Hauser,
Deputy Governor of the Reserve Bank of Australia, is speaking at 6 pm
Sydney time (0700
GMT, 0200 US Eastern time)
at the Australian Business Economists Annual Dinner.
I don’t have a topic for this.

Gold traded above USD2700 briefly.

This article was written by Eamonn Sheridan at www.forexlive.com.

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