BOJ Hike Bets Fuel Yen Decline
The yen has been declining for years, and this week it suffered its biggest weekly loss in about a month. The currency fell by approximately 0.9% to 159.29 per dollar, nearly reaching four-decade lows due to low interest rates and government spending concerns.
Traders are speculating that either rate hikes or another round of official buying will be necessary to stem the decline. The yen's retreat mirrors a similar selloff in May after official buying.
A Reuters report on Friday suggested that the Bank of Japan is planning to raise interest rates as soon as September, with some policymakers considering more aggressive hikes.
The Japanese currency rose slightly in Friday trade following this news, but markets have already bet on a BOJ hike in September, with a 76% chance according to Tokyo Tanshi data. This increase from 24% on July 30 opens the door to further yen falls if investors are disappointed.