BOJ Dovishness Sparks USD/JPY Volatility Ahead of Trump-Xi Summit

The Bank of Japan's recent policy meeting has left markets wondering about the future of USD/JPY. In a move seen as somewhat dovish, the BOJ hiked rates by 25bps to 1.25%, but failed to sound more hawkish in its statement. The decision was met with a mixed reaction from board members, with two appointees of Prime Minister Sanae Takaichi's administration dissenting in favor of holding off on rate hikes.

Despite the slight dovishness, USD/JPY moved higher, reaching above 158 after the meeting. However, news reports that the BOJ conducted a rate check during the New York session sparked concerns about potential intervention risks, causing the pair to dip below 157.

Looking ahead, markets will be keeping a close eye on the Trump-Xi Summit on September 24, which is expected to focus on trade, investment, and other key issues. Initial signs from meetings between US Treasury Secretary Scott Bessent and China's Vice Premier He Lifeng suggest positive developments amidst low expectations.