BOJ's Hawkish Tilt Remains Unconvincing for Yen

The yen remains volatile after its sharp drop last week, which has traders on alert for an official intervention to prop up the currency. The Bank of Japan raised rates to their highest level in 31 years on Friday, yet the move did not boost the yen as two dissenting votes and a lack of explicitly hawkish guidance disappointed investors.

The rate hike was widely expected, but the BOJ's messaging has become harder due to the Federal Reserve's unanimous decision to raise its policy rate. Fred Neumann, chief Asia economist at HSBC, said 'the bar thus remains high for the BOJ to convince markets of its hawkish tilt and anchor expectations when it comes to the yen.'

The dollar index was steady at 100.23 after gaining more than 1% last week following the Fed's rate hike, as the central bank signalled more increases could be coming. Traders are currently pricing in a 55% chance of a rate hike at the Fed's next meeting in October.