Yen Climbs to Strongest This Year Versus Dollar on BOJ Hike Bets

The yen hit its strongest level against the dollar since December, beating all major currencies’ performance on Thursday amid growing speculation the Bank of Japan will hike rates sooner rather than later.

Japan’s currency climbed as much as 0.8% to 150.21 against the dollar, a level it hasn’t touched since Dec. 9. Government bond yields are also on the rise, with the 10-year benchmark hitting its highest level since 2009. Overnight index swaps are pricing in an 83% chance of a rate hike by the central bank’s July meeting, compared with about 70% odds at the start of this month, with a hike now seen as certain by September.

The central bank’s governor Kazuo Ueda said on Thursday that he did not discuss rising yields in a meeting with Japanese Prime Minister Shigeru Ishiba. BOJ Board Member Hajime Takata also said on Wednesday that it’s important to continue considering gradual rate hikes, while also noting that Japan’s bond yields are moving in line with the market’s view of the economy.

The yen’s appreciation also comes before the nation’s CPI data on Friday, where a stronger-than-expected print may push traders to buy the Japanese currency. Fast money funds are positioning for a strong Japanese CPI print, according to an Asia-based FX trader. Economists surveyed by Bloomberg expect a median of 4% for the CPI data, a figure it hasn’t seen since January 2023.

Source: FINANCE.YAHOO