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Yen faces fresh focus on Kazuo Ueda remarks after BOJ meeting
Traders are weighing whether Ueda signals a faster path for future rate hikes, with OIS implying about a 29% chance of a hike by September.
The Japanese yen is set for another high scrutiny moment after Bank of Japan Governor Kazuo Ueda speaks following the central bank’s policy meeting on Friday, as investors look for any misstep that could extend the currency’s slide, LiveMint Markets reports, citing Bloomberg. The yen weakened further this month after falling to the lowest level against the dollar since 1986 in June, with pressure attributed to rising oil prices, fiscal concerns, and wide interest rate differentials. Even after the authorities’ record intervention in the last quarter, traders continue to focus on whether clearer guidance from Ueda can stabilize the currency. Market participants do not expect a sharp rebound automatically, but the tone of Ueda’s comments could shift expectations for future BOJ tightening. RBC BlueBay’s Mark Dowding said that if Ueda is not sufficiently hawkish, the yen may continue to weaken beyond 165 per dollar, and he expects the governor to potentially “open the door” to a hike at the September or October meeting. Officials are also considering raising rates at a faster pace because continued yen weakness adds to upside inflation risks, according to people familiar with the matter. Still, half of the economists surveyed by Bloomberg expect the BOJ to wait until December, with Prime Minister Sanae Takaichi’s government viewed as a potential obstacle, including its proposal to lower taxes on food. Overnight index swaps show roughly a 29% chance of a rate hike by September and about a 78% chance by October.