USD/JPY renews 23-year high at 138.30, US PPI eyed

• USD/JPY has refreshed its 23-year high at 138.30, more upside looks likely on hawkish Fed bets.
• A higher inflation rate will trim the value of paychecks for US households.
• The downbeat inflation data has weakened the yen bulls.

The USD/JPY pair has renewed its fresh 23-year high of 138.30 in the Asian session. The asset is holding its elevated levels firmly and is expected to accelerate further as the market participants have started betting on a surprise rate hike of 100 basis points (bps) by the Federal Reserve (Fed) later this month.

The release of the improved inflation report by the US Bureau of Labor Statistics has paddled up the fears of enlarging real income shocks in the US.  The annual US Consumer Price Index (CPI) has landed at 9.1%, much higher than the estimates of 8.8% and the prior release of 8.6%. This is going to trim the value of ‘paychecks’ received by US households. In order to tame the inflation monster, the Fed is bound to hike its interest rates as its foremost agenda is to bring price stability.

In today’s session, the release of the US Producer Price Index (PPI) excluding food and energy will be of utmost importance. As per the market consensus, the economic data is expected to land at 8.1%, lower than the prior release of 8.3%. An expectation of a slippage in the producer inflation data indicates that volatile oil and food prices are driving inflation higher.

On the Tokyo front, the downbeat Industrial Production data has weakened the yen bulls.  The economic data has landed at -4.7% lower than the estimates and the prior release of -2.8% on an annual basis. Also, the monthly figures have slipped to -7.5% from the consensus and the former print of -7.2%.