USD/JPY Remains Above 117.50 on Election Outlook

Foreign-exchange volatility reached its highest in more than nine months as forecasts for economic growth and less-stimulative monetary policy in the U.S. diverge from overseas prospects.

The dollar slipped from a five-year high even as a report showed faster-than-forecast U.S. inflation. The yen reached a seven-year low versus the greenback as Japanese lawmakers prepare for early elections in which Prime Minister Shinzo Abe will seek a fresh mandate for economic stimulus. UBS AG said the Swiss National Bank “might have started” buying euros to defend its currency cap. South Africa’s rand and Russia’s ruble rallied.

“Anytime you’ve got the Fed shifting policy, it’s going to increase volatility,” Jennifer Vail, the head of fixed income at in Minneapolis U.S. Bank Wealth Management, said by phone. “We do expect the dollar to trade sideways for the remainder of the year. Once we get to a new year, though, it’s going to be a whole new story.”

Bloomberg

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