USD/JPY dropped 1.22% to 154.33 in holiday-thinned trading, hitting its lowest level in about six months, as markets moved close to fully pricing in a Bank of Japan rate hike this month. The yen has now gained roughly 3.4% over the last five sessions, while the dollar slipped against every major currency except the New Zealand dollar.
USD/JPY fell 1.22% to 154.33, touching an intraday low of 154.07 — the pair's weakest point in about six months. US stock and bond markets were closed for the Labor Day holiday, but that didn't stop the yen's advance: the currency has now strengthened roughly 3.4% over the last five trading days.
BOJ rate-hike bets drive the move
The catalyst is a shifting outlook for Bank of Japan policy. Takuji Aida, an economic adviser to Japanese Prime Minister Sanae Takaichi and someone previously seen as opposing tighter policy, said he expects the BOJ to raise rates at its September meeting. Markets are now close to fully pricing in a 25-basis-point increase to 1.25%.
That matters because USD/JPY has been supported for years by the wide interest-rate differential between the United States and Japan. If the BOJ tightens while the Federal Reserve stays on hold, that spread narrows. As a result, borrowing yen to fund purchases of higher-yielding assets — the yen carry trade — becomes less attractive.
Intervention chatter adds to the pressure
Thin holiday liquidity also fed continued speculation about possible Japanese intervention to slow the yen's advance. Still, the more fundamental driver remains the rising probability of a BOJ hike, combined with the chance that the Fed holds steady following Governor Christopher Waller's more dovish comments last week.
Dollar broadly softer across majors
The dollar traded lower against every major currency except the New Zealand dollar, which gained a modest 0.09%. The closing snapshot showed EUR/USD rising 0.08% to 1.1622 and GBP/USD adding 0.12% to 1.3537, while USD/CHF slipped 0.02% to 0.8093 and USD/CAD fell 0.15% to 1.3816.
For traders, USD/JPY remains the clearest example of how shifting rate expectations move currency markets. Intervention concerns may accelerate swings, but whether the BOJ follows through on a hike — and whether the Fed keeps holding — will decide the pair's next leg.
Source: Investinglive RSS Breaking News Feed
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