BoJ Hike Expectations Boost Japanese Yen Against US Dollar

The Japanese Yen has strengthened against most G10 currencies as markets increasingly price in a Bank of Japan (BoJ) rate hike in September. According to MUFG, expectations of tightening are being driven by services PPI data and hawkish commentary from former BoJ officials.

Former BoJ policy board member Seiji Adachi stated that the BoJ will likely raise rates in September and again in January, echoing MUFG's current view.

The implied probability of a BoJ rate hike at the September meeting is 85%, the highest since June. This has contributed to the yen's strength against the US Dollar (USD), with USD/JPY potentially facing further downside.