FX.co ★ Japanese Yen Edges Lower as Dollar Gains

The Japanese yen weakened beyond 159 per dollar on Tuesday, extending its recent slide as the greenback edged higher on safe-haven demand. The move was supported by a US plan to further isolate Iran from the global financial system, underscoring the dollar’s dominant role in international trade.

However, renewed worries over a potential US debt crisis capped the dollar’s advance, amid market skepticism about the effectiveness of the US Treasury Department’s expanded debt buyback program.

On the domestic front, former Bank of Japan board member Seiji Adachi said the central bank is likely to raise interest rates next month and again as early as January. He warned that keeping rates on hold could trigger a renewed selloff in the yen and intensify import-driven inflation.

Markets are now assigning roughly an 80% probability to a 25-basis-point rate hike by the BOJ next month, to 1.25%. That is up sharply from around 23% before the central bank’s July meeting.