In the NY market, USD/JPY briefly fell into the 157 handle as the dollar was sold into a rebound, but buying at lower levels brought it back into the 158 handle in the latter half of the session. US PPI beat expectations, but the market reaction was limited.
In today's NY FX market, selling into a rebound in the dollar dominated, and USD/JPY briefly fell into the 157 handle, but buying at lower levels brought it back into the 158 handle in the latter half of the session. The September US producer price index (PPI) beat market expectations, but despite providing support for expectations of a Federal Reserve rate hike, the reaction was limited. Compared with the moves following the previous day's US CPI release, the dollar's response was not straightforward, and overall momentum behind the dollar's appreciation weakened.
The dollar briefly reached a high after the previous day's upside surprise in CPI, but subsequently surrendered most of its gains, with USD/JPY capped near its 200-day moving average. A breakdown of the data prompted some observers to point out that headline inflationary pressure remained weak and that core inflation was relatively subdued.
Meanwhile, the euro showed signs of recovery against the dollar, while EUR/JPY was bought back from the low 176s. Expectations for October rate hikes by the major European central banks have receded, and the view that the ECB is unlikely to deliver additional rate hikes is becoming more widespread. Sterling also briefly recovered to the 1.32 dollar handle.