BoJ Rate Hike Risk Triggers Rangebound USD/JPY

The Japanese Yen is trading in a flat range against the US Dollar, with markets focusing on the Bank of Japan's (BoJ) September policy meeting. Scotiabank analysts note that the BoJ's policy normalization path is a key driver for the Yen, and any hawkish surprise could trigger a sharp move in USD/JPY.

The BoJ has signaled its willingness to adjust policy if inflation and wage growth remain on track. However, the timing and magnitude of any move remain uncertain, keeping traders cautious.

Scotiabank suggests that the BoJ is likely to proceed cautiously due to the fragile state of the global economy and potential market volatility. The US Dollar's resilience is underpinned by the Federal Reserve's higher-for-longer interest rate stance, which contrasts with the BoJ's ultra-loose policy.