Yen briefly surges into the lower ¥155 range on expectations of successive BOJ rate hikes and Fed remarks favoring a hold

In the New York foreign exchange market, the yen surged against the dollar, briefly reaching ¥155.47 per dollar as the yen strengthened sharply and the dollar weakened from the previous day. The move was attributed in part to growing expectations that the BOJ would accelerate the pace of rate hikes at its September monetary policy meeting, as well as remarks from a senior Fed official indicating that a rate hike at the next meeting would not be viewed negatively.

A speech by BOJ board member Takata Hajime (高田創) was widely interpreted as suggesting the possibility of successive rate hikes beyond the conventional expectation of two hikes a year, leading the market to take it as a sign of a change in the BOJ's policy outlook. Although speculation about intervention emerged, no evidence of intervention was found in the BOJ's funds-supply and demand data, and the prevailing view was that the main driver was a change in expectations for BOJ monetary policy.

The Ministry of Finance emphasized its readiness to act and said it was closely monitoring market developments, while avoiding specific comments on the outlook for the Japan-US interest-rate differential and exchange-rate levels. Speculation that GPIF may review its asset allocation was also cited as a factor supporting yen buying, and some analysts said upward pressure on the yen could persist as expectations of a narrowing Japan-US interest-rate gap strengthened. Fed Governor Waller indicated that he remained open to considering a rate hike depending on forthcoming data, while signaling support for keeping current rates unchanged if a slowdown in inflation could be confirmed.

Speculation about a review of GPIF's asset allocation and expectations of BOJ rate hikes were cited as factors supporting the yen, prompting views that dollar-yen volatility would remain elevated.