FX.co ★ Yen Declines for Third Straight Session

The Japanese yen weakened beyond 155 per dollar on Wednesday, extending its slide for a third straight session as the US currency strengthened ahead of a widely expected Federal Reserve interest rate hike. Additional downward pressure on the yen came from rising oil prices, which are pushing up import costs for Japan’s energy-dependent economy.

Even so, the yen continues to find support from expectations of more aggressive policy tightening by the Bank of Japan, recent coordinated currency interventions by Tokyo and Washington, and the prospect of increased capital repatriation by domestic investors. Futures markets are currently pricing in roughly an 80% probability of a BOJ rate hike on Friday, with another increase anticipated by the end of January.

On the data front, Japanese exports rose more than expected in August, underpinned by robust demand for AI-related chips, despite ongoing supply-chain disruptions linked to the conflict in the Middle East.