BOJ Rate Hike Bets Fuel Yen's Rally as GPIF Rebalancing Rumors Return

The yen has strengthened over recent sessions, pulling USD/JPY back towards the 155.00 support level that has held several times this year.

This time, the shift is being driven by fundamental factors rather than intervention, with expectations for tighter Bank of Japan policy increasing and fiscal-policy concerns remaining in focus.

Market pricing now suggests a 25bps Bank of Japan rate hike this month, which is less aggressive than earlier talk of a 50bps move.

Derivatives imply almost 50bps of cumulative tightening by year-end, and just over 75bps by mid-next year, slightly faster than forecasts that look for a further 75bps of hikes.