Yen approaches 159.00 as Treasuries climb back above 5%

• Just below 159.00, USD/JPY reaches its strongest level since mid-October.
• The Yen weakens despite a BoJ summary indicating agreement among members on further rate increases.
• Friday brings October US producer price data, following September's 1.3% surge.

The Yen has weakened to its lowest level against the Dollar since mid-October, while new US 10-year notes sold on Tuesday offer an annual return of 5%, the highest since 2006. Climbing to just below 159.00 Yen, the Dollar has more than recovered Monday's losses and regained levels above Friday's close.

Persistent inflation pressures remain a possibility, according to Fed Vice Chair for Supervision Bowman, who said October's consumer price data do not indicate a downward inflation trend. At 3.75%-4.00%, the Fed's rate range exceeds the Bank of Japan (BoJ) rate of 1.25% by 2.50-2.75 percentage points. A Dollar deposit therefore offers roughly that much more interest than a Yen deposit.

The Yen continued to lose ground even as a summary released on Tuesday showed broad agreement among BoJ members at their October meeting on the need for further rate increases. An expected BoJ hike to 1.50% on December 18 would follow a Fed move to 4.00%-4.25% nine days earlier, keeping the rate differential unchanged.

Which data releases could shape the rate outlook?

The extent to which US rates rise above Japan's will be influenced by two upcoming releases. At 13:30 GMT on Thursday, US weekly jobless claims are forecast at 195K, compared with 189K. October producer prices follow at 13:30 GMT on Friday, with annual growth expected to reach 6.6% from 6.3%.

Ahead of the BoJ's December 17-18 meeting, Japan's October producer prices will be among the final Japanese price releases. Due at 23:50 GMT on Wednesday, they are expected to show a year-on-year increase of 6.5%, following 6.8%. Most economists anticipate a rate increase to 1.50% at that meeting.

Where does USD/JPY stand within its trading range?

Against the Yen, the Dollar is trading at the upper end of its range since September 24; the lower end was marked by the October 23 low near 156.00. Even so, this range remains considerably below both the late-July peak near 164.00 and the September 2 high near 160.50.

USD/JPY: daily price chart