Yen Remains Undervalued Despite BOJ Rate Hike
The US dollar held steady on Tuesday, with Asian currencies trading mixed as investors assessed the Bank of Japan's recent policy shift and the prospect of further rate increases.
Despite a holiday in Japan keeping trading relatively thin, the yen remained under pressure due to lingering intervention risks. According to DBS FX & Credit Strategist Chang Wei Liang, the yen is significantly undervalued despite earlier joint US-Japan interventions and the BOJ's 25-basis-point rate hike in September.
The yen weakened after the policy announcement before stabilizing when Japanese authorities conducted a rate check, a step markets often view as a precursor to foreign-exchange intervention. Japan has significant capacity to intervene, with accumulated foreign-exchange reserves of around $1 trillion.