BOJ Rate Hike Anticipation Sparks Yen Intervention Fears

Yen traders are on high alert ahead of the Bank of Japan's (BOJ) policy meeting, which is set to take place on September 18. The anticipation of a rate hike has seen the yen gain as much as 0.5% to 157.99 on Thursday, and another 1.2% during New York hours on Wednesday. Some investors are speculating that Japan could employ a similar tactic to April's intervention, where authorities waited until a long Japanese holiday to intervene in the currency market for the first time since 2024.

Samara Hammoud, a strategist at Commonwealth Bank of Australia, said: 'Silver Week probably adds a bit more uncertainty around the yen, mainly because liquidity can be thinner during the holiday period.'

The BOJ's decision is expected to have significant implications for the currency market. Speculative positioning has turned against the yen, with hedge funds rebuilding short positions after initially slashing bearish bets following the intervention.

The US Treasury Secretary Scott Bessent has been vocal about his expectations from Japan, saying that they are prepared to enter the market again without hesitation if necessary. Any failure to raise interest rates would send the yen tumbling, and investors will be watching closely for the Federal Reserve's policy meeting just days before the BOJ's.