USD/JPY around 101.60 on Inflation Report

The yen strengthened as a government report showed inflation accelerated to the fastest in more than 20 years in April, reducing the prospect of additional stimulus by the Bank of Japan.

Japan’s currency advanced for a third day against the dollar as U.S. 10-year Treasury (USGG10YR) yields near the lowest level since June reduced the attraction of holding the greenback. The euro headed for its biggest monthly decline in a year against nine major peers amid speculation the European Central Bank will expand easing when it meets next week. Australia’s dollar rose to a one-week high before a report this weekend that economists said will show China’s manufacturing expanded.

“There is a ripple of concern that the BOJ is reluctant to conduct further policy easing,” said Greg Gibbs, head of Asia-Pacific markets strategy at Royal Bank of Scotland Group Plc in Singapore. “The other side, of course, is U.S. yields continue to remain very low. Despite the data strength in the U.S. this week, yields have generally fallen, so that’s clearly putting a cap on the U.S. dollar.”

Bloomberg

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