Yen Vulnerability Skyrockets Amid Holiday and Hawkish Misstep

The Japanese yen is facing increased vulnerability due to Tokyo's three-day holiday. The thin liquidity that comes with it may lead to sharper declines in the currency.

Last week, the Bank of Japan (BOJ) raised interest rates to 1.25 percent, which was seen as a missed opportunity for hawkish action. Despite this, intervention remains a possibility due to recent rate checks and record intervention.

The BOJ's decision did not deliver the follow-through yen bulls were expecting, with Governor Kazuo Ueda acknowledging that policy settings had shifted but stopping short of signaling another hike was imminent.