Bank of Japan's Dovish Rate Hike Leaves Yen Vulnerable

The Bank of Japan's rate hike has left the yen vulnerable to further depreciation. The central bank raised its key rate by 25 basis points to 1.25%, but the decision was met with a dissenting vote from two board members, who argued that a rate hike at this meeting was unnecessary without a renewed pick-up in inflation.

The Bank of Japan's dovish message has given the US Federal Reserve room to continue its hawkish stance. The Fed's dot plot suggests it plans to hike again this year, and oil prices remain elevated, which could push USD/JPY back towards 160 in the coming weeks if the Fed hikes as early as October.

The European Central Bank speakers have resumed their public appearances, with a broadly hawkish tone. However, there's no shift in tone expected in the near term, and the dovish camp remains weak.