USD/JPY slips below 145 as BoJ rate-hike bets build
The yen strengthened past the 145 handle against the dollar as traders raised bets on further Bank of Japan tightening later this year.
The Japanese yen strengthened through the 145.00 level against the US dollar on Monday, its firmest showing in three weeks, as traders added to bets that the Bank of Japan will raise rates again before year-end.
Swaps markets moved to price in a live probability of a further quarter-point hike, building on recent comments from BoJ officials that policy remains far from neutral even after this year's earlier moves.
Fresh data showing stronger-than-expected wage growth added to the case for continued normalisation, a key precondition the central bank has repeatedly cited for further tightening.
With the Federal Reserve also seen as edging toward a lower-rate path, strategists said a narrowing yield gap between the two economies remains the dominant driver behind the yen's recent advance.
Key Takeaways
- USD/JPY broke below the 145.00 level for the first time in three weeks.
- Swaps markets now price in a live chance of a BoJ hike before year-end.
- Firmer wage data out of Japan added to the case for policy normalisation.
- A narrower US-Japan rate gap is seen as the key driver of the yen's advance.
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