Yen Retraces Some Intervention Gains

The Japanese yen traded around 157.8 per dollar on Friday after rising for two straight sessions, as data showed that nominal wages in Japan rose at their fastest pace in nearly three decades, strengthening expectations of another Bank of Japan interest rate hike in December. Minutes from the BOJ’s September meeting also suggested that the central bank could accelerate monetary tightening as it assesses the effects of developments in the Middle East, rising AI-related demand and foreign exchange movements. The BOJ raised its policy rate to a 31-year high of 1.25% in September before leaving it unchanged in October, while indicating that underlying inflation had reached its 2% target. The yen also benefited from safe-haven demand amid an intensifying global equity selloff, fueled by concerns over tighter AI industry regulation following a sweeping Democratic victory in the US midterm elections.

The Japanese yen strengthened past 158 per dollar on Thursday, extending gains for a second consecutive session as minutes from the Bank of Japan's September meeting reinforced expectations of further monetary tightening. One board member indicated that there may be room to accelerate interest rate increases as the central bank assessed the effects of Middle East developments, growing demand linked to artificial intelligence, and foreign exchange movements. The BOJ raised its policy rate to a 31-year high of 1.25% in September before keeping it unchanged in October, while signaling that underlying inflation had reached its 2% target, potentially setting the stage for another rate hike in December. The yen also drew support from a weaker US dollar following Democratic victories in the US midterm elections. The decisive outcome eased political uncertainty and lowered expectations that President Donald Trump would resume military strikes against Iran.

The Japanese yen strengthened toward 157.5 per dollar on Wednesday, reversing a two-day decline as the US dollar came under significant pressure after early election polls suggested a possible Democratic takeover of both chambers of Congress. The prospect has heightened political uncertainty in the US, with a potential Democratic sweep raising concerns over stricter AI regulations and increased corporate oversight that could weigh on the country's economic growth outlook. The yen also gained support from safe-haven demand, alongside government bonds, as technology and artificial intelligence stocks faced renewed selling pressure. Meanwhile, investors are looking ahead to Japan’s wage data due later this week for further clues on the Bank of Japan’s monetary policy outlook. Last week, the BOJ kept its benchmark interest rate unchanged at 1.25% but indicated that underlying inflation had reached its 2% target, potentially paving the way for another rate hike as early as December.