The dollar-yen rate remained in the 159-yen range during today’s New York session, and views are spreading that the yen’s appreciation trend will fade in the short term. Pricing for a BOJ rate hike has not yet been fully reflected.
The dollar-yen rate continued trading in the 159-yen range late in the New York session. Although Treasury Secretary Bessent made remarks discouraging yen depreciation, the impact of the yen’s appreciation may fade in the short term, according to some observers.
The market is pricing in less than a 70% probability of a BOJ rate hike in September, and the move has not yet been fully priced in. The factors supporting yen appreciation are considered limited, and the delay in pricing may affect market developments going forward.
Even if the BOJ forces through a rate hike, eliminating the structural factors behind yen depreciation is expected to be difficult. Overseas assets and capital flows have a substantial influence, and fundamental change is unlikely unless the repatriation of overseas assets and GPIF rebalancing progress. It will take time for real interest rates to catch up with overseas levels.
Yen-buying intervention, the market’s main source of support, has exposed its limits. Although the exchange rate may at times return to the ¥160 range, gains are likely to remain constrained. Demand for yen carry trades, supported by low volatility, remains strong, and the tug-of-war around ¥160 is expected to continue for the time being.