The Japanese Yen (JPY) weakened across the board during the Asian session on Friday (6/27) in reaction to data showing that consumer inflation in Tokyo slowed sharply in June. Moreover, Japanese Retail Sales posted growth for the 38th straight month, albeit at the slowest pace since February.

This came on top of expectations that the Bank of Japan (BoJ) could delay an interest rate hike until Q1 2026, which, along with upbeat market sentiment, turned out to be the main factors weakening the safe-haven JPY. Moreover, uncertainty over the impact of US tariffs on the Japanese economy turned out to be another factor contributing to the JPY's relative underperformance on the final day of the week.

However, investors seem confident that the BoJ will stick to its path of monetary policy normalization as inflation in Japan has consistently exceeded its annual target of 2%. This marks a significant divergence compared to other major central banks' push towards a looser approach and could limit losses for the lower-yielding JPY.

On the other hand, the US Dollar (USD) struggled near its lowest level in three-and-a-half years amid concerns about the independence of the Federal Reserve (Fed) and bets that the US central bank could resume its interest rate-cutting cycle as early as next month. This further contributed to capping gains for the USD/JPY pair, which remains on track to post a big weekly loss. (alg)

Source: FXstreet