FX.co ★ Yen Weakens as Dollar, Treasury Yields Weigh

The Japanese yen weakened beyond 158 per dollar on Thursday, erasing recent gains as both the US dollar and Treasury yields climbed on expectations that the Federal Reserve may need to raise interest rates further to curb energy-driven inflation. The yen also remained under pressure from the wide interest-rate gap between the US and Japan, with prospects of additional Fed tightening still outweighing the impact of the Bank of Japan’s rate hikes.

Still, softer-than-expected US PCE inflation data led traders to scale back bets on a Fed rate increase in October. In Japan, a summary of opinions from the BOJ’s September meeting indicated that policymakers saw a need to either accelerate the pace of rate hikes or bring them closer to the central bank’s target in the near term.

At the same time, traders remain alert to the risk of currency intervention, as Japanese authorities have intensified their verbal warnings in recent sessions.