FX.co ★ Yen Holds Steady in Thin Holiday Trade

The Japanese yen hovered around 158.2 per dollar on Monday, with trading activity expected to remain muted due to a national holiday in Japan and a bank holiday in the United States. Even so, traders stayed cautious as the currency lingered near the key ¥160-per-dollar level, a threshold that previously prompted Tokyo to intervene in support of the yen.

The currency continued to face downward pressure from the wide interest rate differential between the US and Japan, reflecting Japan’s relatively low domestic borrowing costs and its substantial public debt burden. At the same time, uncertainty persisted over whether the Bank of Japan would deliver another rate hike this month, though markets still priced in the likelihood of a move in December or January.

Bank of Japan Governor Kazuo Ueda observed that rapid monetary tightening was more characteristic of North America and Europe in 2022, following pandemic-era supply chain disruptions and a strong rebound in demand.