USD/JPY Crashes to Six-Month Low as Markets Reprice Bank of Japan Rate Path
The USD/JPY pair has fallen to a six-month low as markets reprice the Bank of Japan's rate path. Despite strong US data, including a 162K payrolls rise and 4.1% unemployment rate, the pair dropped close to two yen on Monday to its weakest level in six months.
The US Federal Reserve hike odds increased to 58%, pushing the two-year Treasury yield to its highest since January 2025. However, this did not support the Dollar, and the pair fell roughly six yen since the September 2 peak just above 160.00.
Japan's policy rate has been at 1% since June, but swaps now price a quarter-point move on September 18 at close to 97%, giving October roughly a one-in-four chance of tightening. Japanese Government Bond yields have risen, with the 10-year clearing 3% for the first time since 1996.
Markets are watching Japan's wage consensus, which is expected to rise to 3.9% YoY after 3.4%, as well as the country's current account forecast at ¥2.87 trillion after a ¥92.3 billion deficit.