Yen Surges to Seven-Month High Amid BoJ Rate Hike Expectations
The US dollar made small moves on Wednesday as traders focused on the Japanese yen's massive rally.
The yen has surged by 4% in September alone and reached a seven-month high of 152.89 against the dollar on Tuesday, before strengthening further to 153.63 on Wednesday.
Financial markets are pricing in a near-certainty of a 25 basis point rate hike by the Bank of Japan (BoJ) on September 18, with traders expecting Governor Kazuo Ueda to signal additional normalization before year-end.
The yen's rally has been buoyed by expectations of policy tightening and intervention speculation. Adam Turnquist, chief technical strategist at LPL Financial, said that a break below the 152 level could accelerate the yen rally and reignite yen carry trade unwind risk, which could have ripple effects across global assets.
In contrast, U.S. Treasury yields surged after the Treasury Department announced it would buy back up to $6 billion in 10-year to 20-year maturities, disappointing investors who had expected a larger purchase.