FX.co ★ Yen Weakens to Over Two-Month Lows

The Japanese yen hovered near the psychologically important 160-per-dollar level on Thursday, after weakening for two consecutive sessions to its lowest point in more than two months and heightening the risk of possible currency intervention. The latest slide was driven by broad-based dollar strength, as markets reacted to expectations of a faster pace of Federal Reserve rate hikes following hotter-than-expected US inflation data and increasingly hawkish remarks from Fed officials.

Futures pricing now suggests about a 91% probability of a Fed rate hike next month, with additional increases in January and April also being factored in. On the domestic front, data showed that Japan’s producer prices rose 7.1% year-on-year in October, above market forecasts of 6.5% and accelerating from a 6.8% gain in September. These figures reinforce expectations that the Bank of Japan will move toward tighter monetary policy, with a rate increase widely anticipated next month and further tightening expected to extend into next year.