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Yen strengthens as traders price faster Bank of Japan tightening

USD/JPY briefly slid near 162.65 before rebounding to around 162.90, with expectations for a faster BoJ rate path and possible FX intervention risks supporting JPY demand.

Reported · Written up by our desk · Major Pairs

The Japanese yen gained against major peers during the European session, with USD/JPY falling sharply to around 162.65 before recovering to roughly 162.90, according to FXStreet. FXStreet links the yen’s strength to a Bloomberg report that Bank of Japan officials are open to raising interest rates at a faster pace than many economists expect. The article adds that Japan’s ongoing yen weakness is seen as increasing upside inflation risks, which could raise pressure for more aggressive tightening.

A faster BoJ tightening cycle could reduce Japan’s interest rate differential versus other central banks, FXStreet notes. Traders are also factoring in concern about potential yen-related FX intervention after a significant depreciation, following comments from Japan’s Finance Minister Satsuki Katayama that authorities will take necessary steps in foreign exchange if needed, though she did not specify levels.

Looking ahead, FXStreet says investors are awaiting Japan’s June National Consumer Price Index data on Friday. The National CPI ex. Fresh Food is expected to rise to 1.6% year-on-year, compared with 1.4% in May, as traders continue to weigh the timing of BoJ policy decisions, including next week’s monetary policy announcement expected to leave rates unchanged at 1%.

Latest closeUSD/JPY 162.90 ▲0.3%

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