USD/JPY Surges Despite BoJ Rate Hike Amid Fed Tightening Outlook

The USD/JPY currency pair rose by 0.63% on Friday to around 156.95, reaching an intraday high of 158.06 before dipping back down.

This move came as the Yen weakened despite the Bank of Japan's decision to raise its policy rate by 25 basis points to 1.25%, a 31-year high.

The decision was made with a seven-to-two vote, with Toichiro Asada and Ayano Sato dissenting, citing concerns about inflation targets.

The Federal Reserve's own benchmark rate rose by the same amount on Wednesday to 3.75%, 4%, and market expectations are now at 55% for another 25 basis point hike in October, up from 40% beforehand.

The US Treasury yields have also increased, with the 10-year near 4.98%, close to its peak of 5.04% last Tuesday, which in turn has driven the Dollar Index above 100.50, a seven-week high.