The yen reached its highest level in over a year on Monday against the dollar. Expectations of a significant rate cut by the U.S. Federal Reserve have pushed the dollar lower against the yen and other major currencies. Markets are increasingly anticipating a half-point rate cut from the Fed, driven by weakening U.S. labour market data.

This week, the Federal Reserve’s rate decision could trigger significant price movements in the forex market. U.S. retail sales, projected to grow modestly in August, are also in focus. If U.S. retail sales rise more than expected, U.S. Treasury yields and the dollar could strengthen, potentially limiting further yen appreciation.

However, the direction of the yen could be highly influenced by Japan’s August core inflation report, which is expected to show an increase to 2.8% from July’s 2.7%. This report will be followed by the Bank of Japan’s interest rate decision. The Bank of Japan could keep its short-term policy rate unchanged this week although rate hikes remain on the table, which could continue to support the yen.