The yen strengthened past ¥153 per dollar, reaching levels not seen since February. Markets are reassessing expectations for a Bank of Japan rate hike, putting the central bank’s policy direction in focus.
The yen strengthened past ¥153 per dollar on Tuesday, rising as high as ¥152.89 in the London market. Market participants are reassessing their views on the Bank of Japan’s policy stance, with the unwinding of short yen positions cited as a factor behind the move.
Markets have priced in an approximately 75% probability of a 0.25% BOJ rate hike, while the probability of another rate hike later this year is estimated at around 60%. Some analysts say accelerating wage growth and the upward revision to GDP support the scope for the BOJ to move away from monetary easing and toward normalization.
The revised GDP figure showed annualized growth of 1.4% in the April–June quarter, while wage growth in the April–June quarter was up 2.4% year on year. The market is interpreting these data as increasing the scope for a shift in BOJ policy.
The yen’s appreciation has produced mixed effects across Asian equities, weighing on export-related stocks while supporting semiconductor shares. Expectations are spreading that rising oil prices and the outlook for US interest rates will also affect market direction going forward.