The yen weakened toward 158 per dollar on Wednesday as the greenback firmed broadly across Asia, with traders awaiting the Federal Reserve's September meeting minutes. A new Bank of Japan board member's comments on raising rates in stages and fiscal concerns over a possible second supplementary budget kept pressure on the currency.
The USD/JPY pair rose 0.2% to 158.38 on Wednesday as the dollar firmed across Asian trading. The U.S. dollar index climbed 0.3% to around 102.15, supported by higher oil prices and rising Treasury yields.
Oil rose as much as 1% to around $101.50 a barrel after Iran increased attacks on tankers in the Strait of Hormuz, pushing Treasury yields higher. The 10-year U.S. Treasury yield rose three basis points to around 5.31%, adding to the dollar's support.
Yen pressured by BOJ fiscal concerns
The USD/JPY pair held around the mid-158s after new Bank of Japan board member Ayano Sato said she supports raising interest rates in several stages. The BOJ could also signal this month that underlying inflation has broadly reached its 2% target, according to reports citing people familiar with its thinking.
Yet DBS FX & Credit Strategist Chang Wei Liang said the yen could remain slightly weaker as the Japanese government considers a second supplementary budget. Markets could react negatively because authorities had previously indicated another package was no longer planned, with reserve funds instead earmarked for disasters and other emergencies, Chang said.
Dollar awaits Fed minutes as hike bets retreat
The dollar has come under some pressure after softer U.S. PCE inflation and jobs data reduced expectations for an October rate increase. Still, markets continue to price further tightening later this year and in 2027.
Odds have shifted: the chance of a Fed hike of at least 25 basis points in October has fallen to 20.5% from about 51% a week ago, according to CME FedWatch. Markets still price an 84.5% probability of a December increase. The Fed will release minutes from its September 15-16 meeting later Wednesday, when it raised rates to combat inflation.
Fed officials Christopher Waller, Neel Kashkari and Alberto Musalem are also due to speak. Kansas City Fed President Jeff Schmid said Tuesday that the central bank still needs to raise rates further to lower inflation.
Source: Investing.com
Trading involves risk.
Risk Disclaimer
