Japanese Yen Rises on Intervention Fears and Rate Hike Expectations

The USD/JPY currency pair has fallen to a seven-month low of 153.50, leaving the Japanese yen near its strongest level in nearly seven months. This decline is attributed to comments from US Treasury Secretary Scott Bessent, who stated that he understands what to expect from the Bank of Japan regarding excessive exchange-rate movements.

Bessent's remarks have increased market participants' caution about betting against the yen. The expectation surrounding Japanese monetary policy is also supporting the yen, with the possibility of a rate hike as early as next week.

The yen is benefiting from the unwinding of carry trades and growing expectations of capital repatriation to Japan. Additionally, sentiment among Japanese manufacturers improved for a second consecutive month in September, supported by resilient demand from the semiconductor and data-centre sectors.