Yen Strengthens as Traders Bet on BOJ Rate Hike
The Japanese yen strengthened by over 2% against the US dollar on Thursday as traders increased bets that the Bank of Japan (BOJ) will raise interest rates at its upcoming meeting. This move comes after BOJ data showed no evidence of official intervention behind the currency's sharp gains on Wednesday.
Analysts pointed to a report by Jeremy Stretch, chief international strategist at CIBC Capital Markets, which stated that there was no USD selling/yen buying by the Ministry of Finance (MoF) on Wednesday. Stretch noted that Japan's top currency diplomat Atsushi Mimura remained on alert over currency market developments and warned that he was not yet comfortable with recent moves in the yen.
The BOJ is set to meet on September 17-18, and markets are now pricing in a 75% chance of a 25-basis-point rate hike this month. Some traders speculate that an even larger increase is possible, while others see an additional hike in October as a possibility.