(Adds analyst comment, rate cut probability, updates prices,)
The yen weakened on Wednesday, pushing the dollar to its highest against the Japanese currency since 1990, with markets alert to any signs of intervention from the Japanese authorities to prop up the yen.
The move came after the latest U.S. inflation data, which showed the Consumer Price Index (CPI) rose 0.4% on a monthly basis in March, compared with the 0.3% increase expected by economists polled by Reuters. Annually it increased 3.5% versus forecasts of 3.4% growth.
Excluding volatile food and energy components, the core figure rose 0.4% month-on-month in March, against expectations of a 0.3% advance. Annually, it gained 3.8%, versus the estimated 3.7% increase.
The dollar was last up 0.4% at 152.30 yen, having touched 152.47, the highest since mid-1990.
Traders have been on watch for weeks for possible intervention by Tokyo authorities, as even a historic exit from negative rates in Japan has failed to lift the currency.
Japan intervened in the currency market three times in 2022, selling the dollar to buy yen, first in September and again in October as the yen slid towards what was then a 32-year low of 152 to the dollar.
The yen has been under pressure for years as U.S. interest rates have climbed and Japan's have stayed near zero, driving cash out of yen and into dollars to earn so-called "carry".
"Dollar-yen is more sensitive to long-term rates than euro-dollar and more unstable at current levels, with a large net long among the leveraged community that could trigger an acceleration in either direction on a big surprise," analysts at Societe Generale said in a note.
Yen futures data from CFTC 1097741NNET showed non-commercial short positions had climbed to 143,230 contracts on April 2, the largest since December 2023.
The dollar index was up 0.6% at 104.71 =USD . The euro fell 0.7% to $1.0785 EUR=EBS .
Following the CPI data, traders
slashed bets
the Federal Reserve will cut interest rates in June after a government report showed inflation was stronger than expected last month.
They now see the likelihood of an interest-rate cut at the Fed's June 11-12 meeting as less than 50%, down from 58% seen before the report, based on the prices of rate-futures.
Ben Vaske, senior investment strategist, at Orion in Omaha, Nebraska, said the CPI report supports recent "Fed speak trying to tame investors' rate cut expectations."
"While cuts are certainly still on the table for 2024, today’s data could be a key data point in pushing out pivot timing even further."
