Yen Strengthens Into 153 Per Dollar, Nearing 2026 High, on BOJ Rate-Hike Bets
Summary
- The yen strengthened into the 153-per-dollar range, nearing its strongest level of the year, on expectations for additional rate hikes by the Bank of Japan (BOJ) and the unwinding of yen carry trades.
- The dollar-yen exchange rate fell below the 155-yen support level, triggering stop-loss orders and dollar selling by options dealers, helping the yen post the biggest gain among G10 currencies.
- The OIS market is pricing in a 97% chance of a 25-basis-point benchmark rate hike by the BOJ, and traders say the yen's strength is likely to persist only if the central bank signals the possibility of another increase later this year.
Forecast Trend Report by Period
The Japanese yen strengthened into the 153-per-dollar range, approaching its strongest level of the year, as expectations for additional Bank of Japan rate hikes and the unwinding of yen carry trades gathered momentum.
Bloomberg reported on September 7 that the dollar-yen exchange rate fell as much as 0.4% intraday to 153.80 yen, down from the previous session. The yen had already gained 1.2% against the dollar a day earlier. It has risen about 4% this month, the best performance among Group-of-10 currencies.
Expectations for further BOJ tightening helped drive the latest gains. The dollar-yen break below 155, a key support level, triggered large stop-loss orders. Selling by options dealers added to the move, steepening the yen's advance. The prospect of portfolio rebalancing by Japan's Government Pension Investment Fund also supported demand for the currency.
Markets are now watching the 152-yen range as the next support area for dollar-yen. Rodrigo Catril, a strategist at National Australia Bank, said the break below 155 clearly opened the door to further declines. The pair could test 152.27 yen and 152.10 yen, he added. The 152.10 level marks the yen's strongest point against the dollar this year.
The yen's strength is also raising the likelihood of further unwinding in yen carry trades, in which investors borrow the Japanese currency at low rates to buy higher-yielding assets. Rinto Maruyama, chief rates and FX strategist at SMBC Nikko Securities, said a move below 154 could trigger additional carry-trade unwinds and stop-loss selling, giving the yen more room to strengthen.
Attention is now turning to the BOJ's next monetary policy meeting. The overnight index swap market is pricing in about a 97% chance that the BOJ will raise its benchmark rate by 25 basis points next week. With much of that expectation already reflected in markets, the yen's rally may extend only if the BOJ also signals the possibility of another rate increase later this year.
Suehyeon Lee
shlee@bloomingbit.ioI'm reporter Suehyeon Lee, your Web3 Moderator.