USD/JPY gathers strength above 152.50, traders brace for US CPI inflation release

• USD/JPY strengthens to around 152.65 in Friday's early Asian session.
• Japan's National CPI rose 2.9% YoY in September; Core CPI climbed as expected.
• The US CPI inflation report for September will be the highlight later on Friday.

The USD/JPY pair extends the rally to a two-week high near 152.65 during the early Asian session on Friday. The Japanese Yen (JPY) weakens against the US Dollar (USD) as traders weigh fresh US sanctions on Russian oil companies. Traders await the delayed release of US Consumer Price Index (CPI) inflation data, which is due later on Friday.

Data released by the Statistics Bureau of Japan on Friday showed that Japan's National CPI rose by 2.9% YoY in September, compared to the previous reading of 2.7%. Meanwhile, the National CPI ex Fresh food arrived at 2.9% YoY in September versus 2.7% prior, in line with the market consensus. Finally, CPI ex Fresh Food, Energy rose 3.0% YoY in September, compared to the previous reading of 3.3%.

The JPY remains weak in an immediate reaction to Japan's National CPI data. Fresh US sanctions on major Russian suppliers Rosneft and Lukoil over Russia's war in Ukraine send oil prices up and weigh on the JPY as well as other currencies related to oil imports.

"The new sanctions were weighing on the yen, as well as other currencies tied to oil imports," said Marc Chandler, chief market strategist at Bannockburn Capital Markets. "Japan's a big importer of oil, and higher oil prices hurt," he said.

The US CPI inflation data for September will take center stage later on Friday despite the US government shutdown. This report could offer some hints about the US interest rate path. The headlines US CPI and core CPI are expected to show a rise of 3.1% YoY in September. If the report shows a surprise downside outcome, this could drag the USD lower against the JPY in the near term.