Yen Strengthens on Broad Dollar Weakness

The Japanese yen traded around 163.5 per dollar on Thursday after rebounding in the previous session, supported by broad dollar weakness following the Federal Reserve’s decision to leave interest rates unchanged. However, three FOMC members dissented in favor of a rate hike, while Chair Kevin Warsh emphasized that the decision to keep rates steady should not be viewed as a sign of policy inertia, adding that markets would continue to respond to incoming economic data. Meanwhile, the Bank of Japan is widely expected to leave interest rates unchanged on Friday while signaling that additional rate hikes remain possible to help curb the yen’s weakness. Verbal intervention from Japanese authorities has so far done little to support the currency, while the BOJ has remained vague about the timing of further policy tightening. On the geopolitical front, the US was reportedly carrying out fresh air strikes on Iran following attacks on American forces in the region.

The Japanese yen traded around 163.7 per dollar on Wednesday, hovering near 40-year lows as investors awaited the Federal Reserve’s latest policy decision, where it is expected to leave interest rates unchanged. However, markets continue to price in about a one-third chance of a 25-basis-point rate hike from the Fed, while also assigning roughly an 80% probability to a rate increase in September. On the geopolitical front, the US military said it had successfully intercepted what it described as a surprise Iranian attack targeting US troops stationed across the Middle East, reigniting regional tensions and pushing oil prices higher. At home, the Bank of Japan is widely expected to keep its policy rate unchanged on Friday while leaving the door open for additional rate hikes to help stem the yen’s decline. Verbal intervention from Japanese authorities has so far provided little support for the currency, while the BOJ has remained vague about its tightening plans.

The Japanese yen traded around 163.7 per dollar on Tuesday, lingering near its weakest level in four decades as the dollar remained firm on speculation that the Federal Reserve could raise interest rates as soon as this week. Meanwhile, the Bank of Japan is widely expected to leave its policy rate unchanged on Friday while keeping the door open to additional rate hikes to help curb the currency’s decline. Verbal intervention from Japanese authorities has so far done little to support the yen, while the BOJ has remained vague about the pace and timing of any future policy tightening. The currency also stayed under pressure even after President Donald Trump said the US was engaged in "good talks" with Iran to end the Middle East conflict, sending oil prices lower and easing concerns over inflation and tighter monetary policy.