Japanese Yen Weakens as BoJ Rate Hike Hopes Fade
The Japanese Yen weakened against the US Dollar on Wednesday, with the USD/JPY pair climbing to around 158.35 during early Asian trading. This move came as expectations for a rate hike by the Bank of Japan (BoJ) in October diminished, reducing support for the Yen. BoJ Governor Kazuo Ueda emphasized a cautious approach, stating that the central bank would assess economic and price risks before deciding on future rate increases. Market odds of a rate hike this month dropped to 12%, down from 40% earlier in the week, though December remains a likely target.
On the US side, traders scaled back bets on a Federal Reserve rate hike this month following weaker-than-expected US jobs data. The Nonfarm Payrolls report showed only 29,000 new jobs in September, well below expectations of 90,000. The Unemployment Rate also rose to 4.2%. Analysts at Rabobank noted that while the BoJ plans to continue raising rates, the market now expects a more gradual pace, with December seen as the next likely move.
Rabobank’s outlook suggests that USD/JPY could decline into 2027 if Fed tightening expectations ease further, though they maintain a short-term target of 155.00. Meanwhile, Fed official Schmid delivered a hawkish speech, highlighting concerns about persistent inflation and the need for continued policy restraint. The Fed’s stance continues to support a stronger Dollar, reinforcing the USD/JPY’s upward bias in the near term.
Technically, USD/JPY remains capped below the 100-day simple moving average at 159.55, with resistance also near the upper Bollinger Band at 159.80. Support is found at the middle Bollinger Band around 156.90, with deeper support at 154.00. The 14-day Relative Strength Index indicates moderate bullish momentum but a broader bearish structural bias.