The Japanese yen rose in the Asian market on Monday against a basket of major and minor currencies, resuming gains that were temporarily halted on Friday versus the US dollar, supported by the weak performance of the American currency, which is trading near low levels following the Federal Reserve meeting.
The yen began the week in positive territory, supported by increased buying interest ahead of the Bank of Japan meeting on Thursday and Friday, where markets widely expect a 25 basis point interest rate hike, marking the second monetary tightening move this year.
Price Overview
• Japanese yen today: The dollar declined against the yen by 0.4% to ¥155.18, from today’s opening level of ¥155.80, and recorded a high at ¥155.99.
• The yen ended Friday’s trading down 0.15% against the dollar, marking the first daily loss in the past three days, amid consolidation and as the decline in the US currency paused.
US Dollar
The US dollar index fell by about 0.1% on Monday, moving back toward its lowest levels in two months, reflecting the continued weakness of the American currency against a basket of global currencies.
The US dollar has remained under negative pressure since last week’s Federal Reserve meeting, after the outcome came less hawkish than markets had expected, reviving bets on the continuation of the federal rate-cutting cycle through 2026.
Bank of Japan
The Bank of Japan meets on Thursday and Friday this week, amid strong expectations of a 25 basis point interest rate hike to a range of 0.75%, the highest level since 2008 during the global financial crisis.
Markets are closely watching what Governor Kazuo Ueda will say about the direction of monetary policy in 2026, at a time when expectations are rising that the Japanese government may resort to additional fiscal expansion, adding further complexity to the policy outlook for the Bank of Japan.
Japanese Interest Rates
• Following recent inflation and wage data in Japan, pricing for the probability of a quarter-point interest rate hike by the Bank of Japan at the December meeting has stabilized above 90%.
• Bank of Japan Governor Kazuo Ueda has presented more optimistic expectations for the Japanese economy in his latest remarks, stating that the central bank will assess the pros and cons of raising interest rates at its upcoming monetary policy meeting.
• Three government officials told Reuters that the Bank of Japan is likely to raise interest rates in December.
Views and Analysis
Analysts at Société Générale said they expect the Bank of Japan to raise interest rates to 1% by July next year, while also anticipating a rate hike when the bank announces its policy decision on Friday.
The analysts added that once rates reach 1%, the Bank of Japan will enter uncharted territory, making it more likely to adopt a cautious tightening pace through gradual 25 basis point increases, with close monitoring of the impact on economic growth and price levels. They expect at least nine months to a full year between each rate hike.
