The yen soared more than 1.7% against the dollar on Thursday, touching a one-month high, as traders raised bets that the Bank of Japan will raise interest rates this month. The move followed hawkish comments from a BoJ board member and mounting pressure from Japanese and US officials, against a backdrop of a global bond sell-off.
The yen soared more than 1.7% against the dollar on Thursday, touching a one-month high of 155.85. Traders raised bets that the Bank of Japan will raise interest rates this month, following hawkish remarks from a BoJ board member.
That gain built on a 0.9% move the previous day, extending a rally that began after a wave of hawkish signals from Japanese policymakers this week.
BoJ policymaker signals a more nimble pace
Remarks from BoJ board member Hajime Takata, who suggested the central bank needs to move more nimbly, heightened prospects of a decisive rate move. Citi told clients the comments were the strongest messaging yet from the board and reintroduce the idea of an expedited rate-hike trajectory.
Separately, BoJ governor Kazuo Ueda said the central bank would now discuss interest rates at every forthcoming meeting, a signal that a move is possible at any time. Swaps markets now show roughly a 25% chance the BoJ raises its benchmark rate by a quarter point at both its September and October meetings.
The BoJ has raised rates incrementally over the past two years as Japan climbed out of decades of deflation, though its main policy rate has held at 1% since July. Markets now see a 77% chance of a rate rise at the BoJ's next meeting, which opens on September 17.
Pressure builds from Washington and Tokyo
US Treasury Secretary Scott Bessent has reportedly pressed Japanese officials to raise rates at G20 talks in Asheville. He also said he believed Japanese authorities would act in ways that strengthen the yen.
Tokyo also sold 30-year government bonds at an average yield just over 4% on Thursday, an auction that showed slightly weaker demand than the previous sale.
Its vice finance minister for international affairs, Atsushi Mimura, said he was neither satisfied nor reassured by the yen's recent moves. Mimura said policymakers "remain on a state of heightened alert," according to the Guardian.
Sources: The Guardian, Financial Times
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