USD/JPY Soars Toward 155 as Fed Hike Bets Intensify

The US Dollar (USD) has strengthened against the Japanese Yen (JPY), pushing the USD/JPY pair toward the 155 level. The currency pair is up 0.41% on the day, a rebound from levels below 153 seen last week.

Investors are anticipating monetary policy decisions from the Federal Reserve (Fed) and the Bank of Japan (BoJ), scheduled for Wednesday and Friday, respectively. Expectations of interest-rate increases from both central banks have put interest-rate differentials in focus, which could lead to volatility in USD/JPY.

The CME FedWatch tool indicates a 92% chance of an interest-rate hike on Wednesday, following robust economic data. The US private sector employment figures also show a solid pace, with ADP's NER Pulse reporting an average of 16.25K jobs added per week over the four weeks ending August 29.

However, Scotiabank strategists note that the Japanese Yen is soft into Tuesday's North American session, with the currency down 0.3% against the USD and underperforming all G10 currencies. They highlight the importance of nearby support around 153, with additional support expected closer to 152.

The near-term focus remains centered on broader themes, including market tone and the Fed, as well as domestic developments such as trade data and CPI ahead of the BoJ policy decision at the end of the week.