2 hrs ago
Dollar Rises Against Yen as BOJ Dissent Clouds Hikes
The Bank of Japan raised interest rates, but the yen became weaker instead of stronger.
Two policymakers voted against the increase, which made traders less certain that more hikes will follow.
The dollar briefly climbed to 158.05 yen.
Japanese authorities reportedly checked exchange rates, a possible early step before intervening to support the yen.
Japan’s finance minister said Tokyo would not rule out further coordinated action.
The US Federal Reserve had also recently raised rates and suggested more increases could come.
This helped support the dollar against several currencies.
Bitcoin rose nearly 6% to $81,000 as it continued recovering from an earlier drop.
The dollar rose against the yen after the Bank of Japan voted 7-2 to raise rates by 25 basis points.
The Bank of Japan lifted its policy rate to 1.25%, its highest level in 31 years.
Traders questioned whether the dissenting votes and limited hawkish guidance signaled a commitment to additional rate increases.
The dollar reached 158.05 yen before paring gains after a report that Japan conducted foreign-exchange rate checks.
Bitcoin rose 5.9% to $81,000, extending its rebound for a third consecutive day.
- Who
- The Bank of Japan, currency traders, Japanese authorities, and the US Federal Reserve were central to the developments.
- What
- The Bank of Japan raised its policy rate by 25 basis points to 1.25%, while the dollar gained against the yen and Bitcoin rose.
- Where
- The currency trading occurred in global markets, with reported Japanese rate checks conducted in Japan’s foreign-exchange market.
- When
- Friday, September 18; the Bank of Japan decision followed the US Federal Reserve’s rate increase on Wednesday.
- Why
- The yen weakened because traders viewed the BOJ’s dissent and guidance as insufficiently hawkish, while the dollar was supported by expectations of further US rate increases.
Further-Hike Expectations
Hike Skepticism
Meaning of the BOJ decision
Further-Hike Expectations
The rate increase to 1.25% could support expectations that the Bank of Japan will continue raising rates.
Hike Skepticism
The 7-2 vote and lack of explicitly hawkish guidance led traders to doubt the BOJ’s commitment to additional increases.
Response to yen weakness
Further-Hike Expectations
Japanese authorities’ reported rate checks and warnings of coordinated action could help push back against one-sided yen selling.
Hike Skepticism
The yen’s weakening after a rate increase suggests that official action may be needed because the BOJ decision did not satisfy currency markets.
Key facts
- BOJ decision
- Rates increased by 25 basis points in a 7-2 vote.
- New Japanese policy rate
- 1.25%, the highest level in 31 years.
- Dollar-yen movement
- The dollar rose as much as 1.3% to 158.05 yen and was later up 0.5% at 156.725 yen.
- Reported Japanese action
- Japan conducted foreign-exchange rate checks, according to the Nikkei newspaper.
- Fed expectations
- Markets priced roughly a 55% chance of a quarter-point US rate hike at the next meeting, up from 27% a week earlier.
- Bitcoin
- Bitcoin rose 5.9% to $81,000.
Quotes
Steven Englander
Head of G10 FX research at Standard Chartered
“The USD strength that we have been forecasting for the medium to long term may finally be here”
livemint.com
“They've just clearly underwhelmed versus expectations here”
livemint.com
Sources
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