Yen Hits Six-Month High on BOJ Rate Hike Expectations
The yen extended its recent rally against the U.S. dollar on Tuesday, hitting a six-month high during Asian trading. The move was fueled by expectations that the Bank of Japan will accelerate its pace of interest rate hikes and potential inflows into Japanese assets. The yen's strength surpassed the level at which Japan and the U.S. jointly intervened in late July to curb yen weakness.
Investors remain on guard for further intervention, after Japan's Finance Minister Kazuyuki Katayama said the country would continue to coordinate with the U.S. to ensure market stability. "We will maintain close communication with the U.S. Treasury to try to maintain order in the foreign exchange market," Katayama said at a press conference on Tuesday. "Our policy stance has not changed at all since the joint currency intervention with the U.S."
Christopher Wong, FX strategist at OCBC Research, said: "The market is almost fully pricing in a 25bp rate hike at the BOJ meeting next week. Comments from economic advisor to the prime minister have also shifted rate expectations, with the advisor predicting further tightening after the September hike."