The Japanese yen rose in Asian trading on Thursday against a basket of major and minor currencies, extending its recovery for a second consecutive session against the US dollar, supported by a wave of selling in the greenback after the Federal Reserve’s meeting delivered a tone that was less hawkish than markets had expected.
The Bank of Japan meets next week, and markets now broadly expect a 25-basis-point rate increase. Investors will be watching Governor Kazuo Ueda closely for clearer guidance on the policy path through 2026.
Price overview
• USD/JPY today: the dollar fell about 0.35% against the yen to 155.49¥, from the opening level of 156.00¥, after touching a high of 156.01¥.
• The yen ended Wednesday up 0.5% against the dollar — its first gain in four sessions — rebounding from a two-week low of 156.96 yen, supported by the outcome of the Fed meeting.
US dollar
The dollar index fell 0.1% on Thursday, deepening losses for a second straight session and hitting a two-month low of 98.54, reflecting continued weakness in the US currency against a basket of global peers.
The Federal Reserve on Wednesday cut interest rates by 25 basis points at the conclusion of its final meeting of the year, bringing the target range down to 3.75% — the lowest since September 2022 — marking a third consecutive cut.
However, Fed Chair Jerome Powell’s comments at the press conference were less hawkish than investors anticipated, surprising markets that had expected a more aggressive tone.
Nick Rees, head of macro research at Monex Europe, said: “For us, the key takeaway was the tilt toward monetary easing in both the policy statement updates and Chair Powell’s press conference.”
Japanese interest rates
• Following recent inflation and wage data in Japan, market pricing for a 25-basis-point rate hike at the December meeting has stabilized above 80%.
• Governor Kazuo Ueda last week offered a more optimistic outlook on Japan’s economy, saying the Bank of Japan would examine the benefits and drawbacks of raising rates at its upcoming policy meeting.
• Three government officials told Reuters the central bank is likely to raise interest rates in December.
Bank of Japan
The Bank of Japan meets next week with strong expectations for a 25-basis-point hike, which would lift the policy rate to around 0.75% — the highest level since 2008, before the global financial crisis.
Markets will focus on Governor Ueda’s guidance for 2026, at a time when expectations are mounting that the Japanese government may pursue further fiscal expansion, adding complexity to the policy outlook for the BOJ.
