USD/JPY (^USDJPY) fell by -0.46%. The yen saw support from Friday’s decline in oil prices, although oil prices rose +9% on the week, which was negative for the Japanese economy, since Japan imports more than 90% of its energy.

The yen had carryover support from Thursday, when BOJ Board member Kazuyuki Masu said, “The BOJ will continue to raise the policy interest rate,” given a prevailing price trend very close to 2% and accommodative financial conditions. He added that “if inflation accelerates here, there is a risk that the BOJ might inevitably need to implement a rapid policy interest rate hike.”

The yen also had carryover support from Tuesday, when the Japanese health minister, who oversees the Government Pension Investment Fund (GPIF) that holds $2.1 trillion in assets, said the fund is still considering whether it needs to review its asset allocation. The recent jump in the 10-year Japanese JGB government bond yield to a 30-year high has fueled speculation that the GPIF may boost its allocation to Japanese government bonds, which would support the yen.

The yen has support from strong expectations of a BOJ rate hike later this month. Markets are pricing in a 96% chance of a +25 bp BOJ rate hike at the September 18 policy meeting. The government favors a rate hike to support the yen and prevent inflationary pressures stemming from the weak yen. Finally, the yen has ongoing support from the recent coordinated US-Japan intervention and fears that further intervention might be forthcoming if the yen remains weak.

December COMEX gold (GCZ26) on Friday closed up +1.60 (+0.04%), and December COMEX silver (SIZ26) closed up +0.261 (+0.40%).

Precious metals prices closed higher on Friday despite generally bearish factors such as a stronger dollar and a rise in the 10-year T-note yield. Precious metals prices were undercut by a slightly stronger-than-expected US CPI report and higher market odds of an FOMC rate hike next week.

Recent fund support for precious metals is bullish for prices, as long holdings in gold ETFs climbed to a 5.75-month high last Thursday. Long holdings in silver ETFs rose to a 5.5-month high on August 25.

Strong central bank demand for gold is supportive of gold prices, following the news on August 7 that bullion held in China’s PBOC reserves rose by +640,000 ounces to 76.08 million troy ounces in July, the twenty-first consecutive month the PBOC boosted its gold reserves.

On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. This article was originally published on Barchart.com