The dollar was up 0.6% versus the yen at 154.93, with the euro up a similar amount at 167.59 yen
The Japanese yen weakened on Tuesday as traders had some doubts about whether the Bank of Japan would raise rates this week, while other majors held steady with Bank of England and Fed meetings also in focus.
The dollar was up 0.6% versus the yen at 154.93, with the euro up a similar amount at 167.59 yen.
The Bank of Japan’s two-day policy meeting is underway and it will announce its rate decision on Wednesday. There has been much anticipation that it will announce a rate hike, building on its hike in March, the first in 17 years.
Markets are currently pricing in slightly more than a 50% probability of a 10 basis points hike.
The market certainly has been quite excited about a rate hike, but economists and BoJ watchers are far less certain, said Jane Foley, head of FX strategy at Rabobank.
Everybody sees a risk of a move, but the surveys are suggesting only around 30% of economists are thinking that the economic conditions are ripe for a move as soon as tomorrow and I think that is probably what’s been weighing on the yen versus the US dollar this morning, Foley said.
The wide gap between Japanese interest rates and those elsewhere have been hurting the yen, which declined to near 38-year lows earlier in July.
Since then however, a number of factors including likely official intervention, a sell-off in equities driving investors out of risk positions and a reassessment of once very popular carry trades have helped it bounce back.
The Bank of Japan has already said it will announce quantitative tightening (QT) plans, with the middle-of-the-road view calling for the bank to gradually halve its monthly bond purchases over a two-year period.
