FX.co ★ Yen Weakens on Fed Rate Hike Expectations

The Japanese yen weakened toward 159 per dollar on Wednesday, nearing a two-month low as the US dollar advanced on the back of hawkish remarks from Federal Reserve officials and stronger-than-expected US inflation data. Markets are now pricing in roughly a 91% chance of a Fed rate hike next month, up from 84% just a day earlier, with further increases in January and possibly April also being anticipated.

The yen remained under pressure despite increasingly hawkish signals from the Bank of Japan. Policymakers broadly concurred that interest rates should continue to move higher, as underlying inflation has reached levels generally in line with the BOJ’s 2% price stability target. BOJ Chief Economist Seisaku Kameda also indicated on Monday that the central bank is likely to raise interest rates in December and continue its monetary tightening cycle into next year.