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Dollar Jumps Around 1 Yen to Above 157 Yen, Nikkei Index Climbs After BOJ Rate Hike
The split vote and cautious guidance left traders unconvinced that faster BOJ tightening is ahead, keeping pressure on the yen.
- The Bank of Japan raised its policy interest rate to 1.25 percent from 1.0 percent on Friday, marking a 31-year high; the yen weakened to 158 per US dollar while the Nikkei Stock Average gained 1.38 percent.
- Board members Toichiro Asada and Ayano Sato dissented in a 7-2 vote, prompting Mizuho Securities Co. chief currency strategist Masafumi Yamamoto to characterize the outcome as dovish. "There were no arguments about a larger rate hike," Yamamoto said.
- The yen slumped further after the US Federal Reserve raised benchmark interest rates to a range of 3.75 to 4 percent earlier this week, widening the interest-rate gap between the two nations and pressuring the Japanese currency.
- Josh Gilbert, lead analyst at eToro, said the split vote raised doubts over future tightening speed, noting a sustained yen recovery requires markets to price in faster rate increases or narrower interest-rate disadvantages.
- Masahiro Ichikawa, chief market strategist at Sumitomo Mitsui DS Asset Management Co., stated steady rate hikes could stabilize prices and interest rates, prompting business investment. OCBC Bank expects the Singdollar to remain resilient against the yen in the near term.
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Why a Rate Hike Can Still Weaken a Currency
Japan did what economic intuition says should strengthen a currency. On September 18, the Bank of Japan (BOJ) raised its policy rate by 25 basis points to 1.25 percent, its highest level in 31 years. Yet the yen weakened rather than strengthened. The apparent contradiction offers a useful lesson. Interest rates matter for exchange rates, […]
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Coverage Details
Total News Sources78
Leaning Left2Leaning Right13Center11Last UpdatedBias Distribution50% Right
Bias Distribution
- 50% of the sources lean Right
50% Right
C 42%
R 50%
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