BoJ Hike Bets Fuel JPY Gains Ahead of US Inflation Data

The Japanese Yen is gaining strength as investors increasingly bet on further monetary tightening by the Bank of Japan (BoJ). The BoJ's policy rate hike, expected to be 25 basis points at its September meeting, would bring interest rates to their highest level in nearly 31 years. This move follows a previous rate hike delivered in June and is supported by inflationary risks stemming from higher Oil prices and the weakness of the Japanese Yen.

BoJ board member Hajime Takata recently suggested that the central bank could adopt a more aggressive approach than previously anticipated, indicating that consecutive rate hikes also remained possible. In contrast to Japan, the United States is set to release key inflation data, with markets assigning around a 62% chance of a Federal Reserve (Fed) interest rate hike at its September meeting.

The USD/JPY pair has been trading lower due to these developments, currently sitting at 153.40 after declining by 0.39% on Wednesday. Technical analysis suggests that the bearish near-term bias is likely to persist, with the Relative Strength Index (14) near 42 indicating downside pressure.