Forex News: Yen Rises Amid BoJ Rate Hike Prospects

Yen Rises Amid BoJ Rate Hike Prospects

(RTTNews) - The Japanese yen strengthened against other major currencies in the European session on Monday, as traders bet that the Bank of Japan or the BoJ is likely to raise its interest rate by a quarter point at its September 18 meeting.

Top currency official Atsushi Mimura and Finance Minister Satsuki Katayama have been outspoken about bringing the yen back to levels that more accurately reflect economic realities.

Kazuo Ueda, the governor of the BOJ, has indicated that he is amenable to changing policy.

Scott Bessent, the US Treasury Secretary, has expressed support for a stronger yen, implying that Washington isn't particularly concerned about the dollar's decline relative to the Japanese yen.

Expectations in the market have changed significantly as a result of this diplomatic cooperation. The likelihood that the BOJ would raise rates at its September 2026 meeting is now being priced in by traders.

After Washington and Tokyo jointly intervened in markets to support the yen, which was at 40-year lows at the time, the dollar fell 1.14% versus the Japanese yen on Monday to 154.42, its lowest since February.

The yen has recovered from the verge of a 40-year low due to an unprecedented ¥15.39 trillion intervention effort and growing prospects for a BOJ rate hike.

In July and August of 2026, Japanese officials purchased currency with an astounding ¥15.39 trillion, the greatest intervention effort ever documented. That's around $100 billion in currency market power used in just two months, to put it in perspective.

In economic news, data from the Cabinet Office showed that Japan's leading index improved in July to the strongest level in twelve-and-a-half years. The leading index, which measures future economic activity, climbed to 117.9 in July from 116.2 in the previous month. The expected reading was 117.9. Moreover, this was the highest score since January 2024, when it was 119.4.

The coincident index that measures the current economic situation also strengthened to a 92-month high of 120.6 in July from 118.9 a month ago.

The lagging index stood at 113.3 in July, up from 111.7 in the previous month.

In the European trading now, the yen rose to near 10-month highs of 179.23 against the euro and 190.51 against the Swiss franc, from early lows of 181.46 and 192.90, respectively. If the yen extends its uptrend, it is likely to find resistance around 178.00 against the euro and 186.00 against the franc.

Against the pound and the U.S. dollar, the yen advanced to near 7-month high of 208.65 and 154.06 from early lows of 211.20 and 156.26, respectively. The yen is likely to find resistance around 204.00 against the pound and 152.00 against the greenback.

Against the Australia and the Canadian dollars, the yen climbed to more than 1-month highs of 111.26 and 114.46 from early lows of 112.61 and 112.94, respectively. On the upside, 109.00 against the aussie and 110.00 against the loonie are seen as the next resistance levels for the yen.

The yen jumped to more than a 5-month high of 90.71 against the NZ dollar, from an early low of 91.93. The next possible upside target for the yen is seen around the 89.00 region.

Looking ahead, U.S. and Canada stock markets are closed in observance of Labor Day holiday.

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