Yen Steadies as Traders Weigh BOJ Outlook

The Japanese yen steadied around 159.2 per dollar on Thursday, remaining within a narrow trading range as investors continued to assess the outlook for Bank of Japan monetary policy. Markets are currently pricing in around an 87% chance of a 25 basis point BOJ rate hike in September to 1.25%, up sharply from about 23% before the central bank’s July meeting. Earlier this week, former BOJ board member Seiji Adachi said the central bank will likely raise rates next month and again as early as January, warning that keeping rates unchanged could trigger another yen selloff and accelerate import-driven inflation. Meanwhile, BOJ Deputy Governor Ryozo Himino said the central bank remains vigilant to inflation risks and will discuss the need for further policy tightening. Elsewhere, BOJ Governor Kazuo Ueda will not attend the Federal Reserve’s annual Jackson Hole symposium this week due to a scheduling conflict.

The Japanese yen appreciated to around 159 per dollar on Wednesday, snapping a two-day decline as oil prices fell further on hopes of renewed diplomatic efforts in the Middle East, easing concerns over higher inflation in the near term. The yen also benefited from dollar weakness as markets prepared for a key US inflation reading and Federal Reserve Chair Kevin Warsh’s speech later this week. Domestically, former Bank of Japan board member Seiji Adachi said the central bank will likely raise rates next month and again as early as January, warning that holding rates could reignite a yen selloff and accelerate import-driven inflation. Markets are currently pricing in around an 80% probability that the BOJ will raise rates by 25 basis points to 1.25% next month, up sharply from about 23% before the central bank’s July meeting. Meanwhile, BOJ Governor Kazuo Ueda will not attend the Fed’s annual Jackson Hole symposium this week due to a scheduling conflict.

The Japanese yen weakened past 159 per dollar on Tuesday, extending its recent decline as the dollar gained modestly on safe-haven demand, with a US plan to cut Iran off from the global financial system highlighting the greenback’s central role in international trade. However, renewed concerns over a potential US debt crisis limited the dollar’s gains amid skepticism about the effectiveness of the US Treasury Department’s expanded debt buyback plan. Domestically, former Bank of Japan board member Seiji Adachi said the central bank will likely raise rates next month and again as early as January, warning that holding rates could reignite a yen selloff and accelerate import-driven inflation. Markets are currently pricing in around an 80% probability that the BOJ will raise rates by 25 basis points to 1.25% next month, up sharply from about 23% before the central bank’s July meeting.