USD/JPY climbs to fresh 2023-high above 136.00

• USD/JPY gathered bullish momentum and climbed above 136.00 on Friday.
• The data from the US showed that PCE inflation rose at a stronger pace than expected in January.
• USD/JPY remains on track to post its highest weekly close since early December.

After having spent the European trading hours near 135.00, USD/JPY gathered bullish momentum in the early American session on Friday and reached its highest level since December 20 at 136.46. As of writing, the pair was trading at 136.30, where it was up 1.2% on a daily basis.

PCE inflation data fuels USD rally

Earlier in the day, incoming Bank of Japan Governor Kazuo Ueda said that a weak Japanese Yen would support exports, inbound tourism and some service sectors. Ueda added that they would need to normalize the monetary policy if inflation makes headway toward 2%. Since the data from Japan revealed that the National Core CPI edged higher to 4.2% on a yearly basis in January from 4% in December, these comments failed to help the Yen gather strength.

In the second half of the day, the US Bureau of Economic Analysis reported that the annual Personal Consumption Expenditures (PCE) Price Index rose to 5.4% in January from 5.3% in December (revised from 5%). Additionally, the Core PCE Price Index, the Fed's preferred gauge of inflation, rose 0.6% on a monthly basis and lifted the annual rate to 4.7% from 4.6%.

Reflecting the positive impact of hot inflation data on the US Dollar, the US Dollar Index advanced above 105.00 for the first time since early January.

Meanwhile, the benchmark 10-year US Treasury bond yield climbed to 3.95% following Thursday's slide and pus additional weight on USD/JPY's shoulders.

Technical levels to watch for