USDJPY Plunges Below 155 as Yen Strengthens Amid BOJ Rate Hike Expectations

The USDJPY currency pair has dropped by over 1%, breaking through the 155.00 level and reaching as low as 154.

This significant drop is attributed to a combination of technical, macroeconomic, and market factors, including the Bank of Japan's growing expectations for interest rate hikes, market speculation on a potential portfolio re-allocation by Japan's public pension fund (GPIF), and reduced liquidity caused by a US holiday.

The breakdown triggered accumulated stop-loss orders and forced option dealers to sell dollars in response to breaching key option barriers. Volatility in the options market covering the upcoming BOJ and Fed meetings has also risen, with risk premiums for further JPY strength near local peaks.