Japanese Yen Stays Range-Bound

The Japanese yen weakened past 155 per dollar on Wednesday, extending its decline for a third consecutive session as the dollar strengthened ahead of an expected interest rate hike by the US Federal Reserve. The yen also came under pressure from rising oil prices, which are increasing import costs for Japan’s oil-dependent economy. Still, the Japanese currency remains supported by expectations of more aggressive policy tightening by the Bank of Japan, recent joint interventions by Tokyo and Washington, and prospects for greater capital repatriation by domestic investors. Markets are currently pricing in roughly an 80% chance of a BOJ rate hike on Friday, with another increase expected by the end of January. Meanwhile, data showed that Japanese exports rose more than anticipated in August, supported by strong demand for AI-related chips despite ongoing supply disruptions stemming from the conflict in the Middle East.

The Japanese yen weakened toward 155 per dollar on Tuesday, declining for a second consecutive session as the dollar strengthened ahead of an expected US Federal Reserve interest rate hike this week. The yen also faced pressure from rising oil prices, which increase import costs for Japan’s oil-dependent economy. Still, the Japanese currency remained near seven-month highs amid expectations for more aggressive monetary tightening by the Bank of Japan, the unwinding of carry trades and signs of increased asset repatriation by domestic investors. The BOJ is widely expected to raise its policy rate to 1.25% on Friday, its highest level since April 1995, as the central bank responds to persistent upside risks to inflation. Markets are also watching for guidance from the BOJ on the potential for another rate hike later this year.

The Japanese yen eased toward 154 per dollar on Monday but remained close to its highest levels since February, supported by expectations for more aggressive policy tightening by the Bank of Japan, the unwinding of carry trades and signs of increased asset repatriation by domestic investors. The BOJ is widely expected to raise its policy rate to 1.25% on Friday, its highest level since April 1995, as the central bank addresses persistent upside risks to prices. Markets are also watching for BOJ guidance on the possibility of another rate hike later this year. Meanwhile, US Treasury Secretary Scott Bessent has repeatedly urged the BOJ to pursue more aggressive policy tightening to prevent excessive yen weakness. Investors also monitored developments in the Middle East as oil prices surged again following Saudi Arabia’s shutdown of the critical East-West pipeline, which bypasses the Strait of Hormuz.