58 mins ago
Yen pressured as hawkish central banks widen global rate gaps
The yen is Japan’s currency, and it became weaker against the U.S. dollar.
This happened because investors think interest rates in the United States and other countries may rise faster than in Japan.
Japan’s central bank recently raised rates, but two officials disagreed and wanted a different approach.
That made traders think Japan might not raise rates quickly enough to support the yen.
Japan may also intervene in currency markets to slow the yen’s decline.
Trading was quieter because Japan had a holiday.
Meanwhile, bitcoin climbed above $87,000, its highest level in eight months.
Other currencies were mostly steady, while the Australian and New Zealand dollars reflected different expectations about interest rates.
The yen fell to 157.33 per dollar as a firm U.S. dollar increased pressure on Japan’s currency.
Japan’s interest-rate gap with major economies remains wide after the Bank of Japan’s latest hike included two dovish dissents.
The yen’s decline was limited by a Japanese holiday and the possibility of currency-market intervention.
Bitcoin rose above $87,000 to an eight-month high as cryptocurrencies rallied.
Markets priced a 30% chance of an October Bank of Japan hike and a 55% chance of a Federal Reserve hike.
- Who
- The yen, the Bank of Japan, the Federal Reserve, and other major central banks are central to the report; traders and analysts assessed their policy outlooks.
- What
- The yen came under pressure as markets expected Japan’s interest rates to remain below those of major peers.
- Where
- Currency markets, with trading activity reported from Singapore and Japan.
- When
- Tuesday, after interest-rate decisions by the Bank of Japan and Federal Reserve the previous week.
- Why
- Investors expected global central banks to maintain a more hawkish stance than the Bank of Japan, preserving a wide U.S.-Japan interest-rate differential.
Key facts
- Yen exchange rate
- 157.33 per U.S. dollar early Tuesday
- U.S.-Japan rate differential
- Approximately 275 basis points
- Bitcoin
- Above $87,000, an eight-month high
- BOJ October hike probability
- About 30% for a rise to 1.5%
- Fed hike probability
- About 55% for a 25-basis-point increase to a 4%-4.25% target range
- Australian rate outlook
- Markets priced a 90% chance of a hike the following week
- New Zealand official cash rate
- 2.75%
Quotes
Carlos Casanova
Senior Asia economist at Union Bancaire Privée
“Unless the BOJ tightens policy more rapidly than the Federal Reserve, the approximately 275-basis-point US-Japan rate differential should continue to support yen-funded carry trades.”
livemint.com
“We expect dollar/yen to rise to 160 by year-end before appreciating moderately to 156 by mid-2027.”
livemint.com
ANZ analysts
Currency and economics analysts at ANZ
“Even with markets expecting about five more official cash rate hikes, that still would not take the OCR anywhere near the US federal funds rate or the RBA cash rate, both of which are expected to keep rising.”
livemint.com
Sources
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