Yen Surges as BoJ Hawkishness Fuels Intervention Speculation

The Japanese yen rallied sharply after hawkish Bank of Japan signals and renewed intervention speculation. USD/JPY fell more than 1% to around 158.20 before ending near 158.70, while EUR/JPY dropped 1.37% to around 181.40 and GBP/JPY fell nearly 1% to about 214.43.

The Bank of Canada left its overnight rate unchanged at 2.25%, but delivered a more cautious message as inflation risks increased and the recovery became harder to assess. Governor Tiff Macklem said multiple rate increases could be required if inflation remained a problem, while stressing that future decisions would be guided by the inflation outlook and the risks around it.

The U.S. rate expectations firmed, with 17 basis points of tightening priced for the 16 September FOMC meeting and the 2-year Treasury yield climbing to a year-to-date high of 4.41%.