Yen firms on BoJ hike bets, dollar awaits Warsh

The Japanese yen led gains today after Tokyo inflation data kept a September Bank of Japan hike on the table, while the dollar held flat ahead of Fed Chair Warsh's Jackson Hole speech.

Asian market drivers

• The Japanese yen was the strongest major on our intraday strength gauge, firming after Tokyo core CPI came in at 1.8% year-on-year for August, down from 1.9% previously, while headline Tokyo inflation came in at 1.9%, in line with forecasts. The core print matched the 1.8% forecast on our own calendar but landed a tenth above the 1.7% the wires were carrying, which is why InvestingLive called it stronger than expected. USD/JPY eased to around 159.30 from just under 159.50, breaking five straight sessions of grinding higher, and markets read the print as enough to keep a Bank of Japan hike alive for the 17-18 September meeting.
• The Australian dollar climbed to a three-month high of 0.7198 and trades at 0.7194, up 0.34%, a fourth straight session higher on hawkish RBA expectations after Wednesday's upside inflation surprise. The yen's strength is against the dollar rather than across the board: AUD/JPY traded near 114.75, up 0.36%, stopping nineteen pips beneath a ceiling the pair has not cleared since 7 September 1990.

Dollar, commodities and geopolitics

• The dollar traded flat as participants waited for Fed Chair Warsh's Jackson Hole address, his first as chair. The speakers ahead of him leaned hawkish: Boston Fed President Susan Collins said the recent PCE report does not change the view that policy is restrictive and will lead to gradual disinflation, while Cleveland's Beth Hammack said "we need restrictiveness in policy" and that now is the time to tackle inflation.
• Yesterday's jobless claims receipt closed on the strong side. US initial claims fell to 203K for the week ending 22 August against a 208K forecast, with the prior week revised up to 207K. The solid labour reading steadied the dollar and nudged the Mexican peso lower.
• Gold recovered its footing on Thursday, trading around $4,610 after bottoming at $4,566, a fresh weekly low, as falling Treasury yields offset the hawkish Fed talk — then edged back below $4,600 to around $4,580 in Asian hours. The $4,700 ceiling we named on Wednesday was not tested a second time: Tuesday's rejection at $4,697, the metal's highest since 14 May, still stands as the level to beat, and the safe-haven bid has not gone away.
• WTI crude eased to around $82.70 in Asian hours after two sessions of gains: on Thursday it ran more than $3.00 off a session low just above $80.00 to trade near $83.50, up 2.52%. Attention is drifting from the Middle East towards Eastern Europe as UK-Russia tensions intensify.
• The Canadian dollar carries the only top-tier data outside the US today, with monthly GDP due. It was the weakest major on our gauge yesterday, when its usual link to oil broke down and the loonie fell while crude recovered. President Trump used a White House press conference to hit Canada on trade again, eleven days before the Section 338 duties and Ottawa's retaliation take effect on 8 September.
• The euro held a modest bid above 1.1650, trading near 1.1655, after touching a three-month high of 1.1711 earlier this week. The ECB's meeting accounts showed policymakers still open to further tightening unless the inflation outlook improves.
• The pound held near 1.3600, effectively unchanged at -0.05% across a thirty-pip range, a third session of drift beneath the high just short of 1.3700 posted earlier this week. UK business confidence rose to a five-month high in the Lloyds survey, with pricing intentions at their lowest since 2022.
• Our strength gauge ranks the Swiss franc as the weakest major, resuming the streak it ran for three sessions to Tuesday before the yen and the Canadian dollar took the slot.
• Iran's Security Chief Mohsen Rezaei said Tehran is preparing a list of conditions to open the Strait of Hormuz at the request of mediators, including an end to the war in the region, Reuters reported. The claim is Tehran's own: President Trump said separately that Hormuz oil keeps flowing, and Treasury Secretary Bessent will press G20 finance ministers to cut off the flows sustaining Iran.

Market metrics and key events today

• Market sentiment, as measured by our FSI, is at 68, indicating Greed, easing from 71 yesterday. The MRS stands at 59, up from 57 and now fully recovered from Wednesday's 41, suggesting a market primed to move, and the CTS is high at 80.
• Key scheduled events on the economic calendar include:

- CAD · GDP m/m: forecast 0.2%, previous 0.3%

- USD · Fed Chairman Warsh Speaks

- USD · Prelim Benchmark Payrolls Revision: previous -911K