Dollar Powers Up Against Yen as Rate-Hike Bets Hit 70%

The US dollar has surged above ¥158.50 against the Japanese yen as traders increase their bets on another Federal Reserve rate hike to 70%. This is up from around 50% last week, driven by persistent inflation, firm US activity, and higher energy prices.

Expectations of a further Fed rate increase have lifted US yields and improved the dollar's carry advantage over the yen. The BOJ raised its policy rate by 25 basis points to 1.25%, but the decision was split 7-2, with Governor Kazuo Ueda offering limited guidance on future increases.

For currency traders, it's not just about current rates but the expected path forward. If the BOJ hikes slowly while the Fed remains willing to tighten, the interest-rate gap will continue to favor the dollar. Japanese officials are also alert to renewed yen weakness, with Finance Minister Satsuki Katayama warning that Tokyo is prepared to act.

The dollar-yen pair is pressing against resistance around 159.00-159.40. A sustained break above this zone would expose ¥160 area, while initial support sits around ¥157.00, followed by ¥156.55, ¥156.65.