Full Breakdown
Yen Squeezed as Global Central Banks Turn Hawkish
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Core Event: Yen Slides as Dollar Gains and Policy Gaps Widen
On September 22, the Japanese yen traded at ¥157.33 per dollar early in the session and later at ¥157.41, marking a third straight daily gain for the greenback. The move follows a Bank of Japan (BOJ) rate hike on the preceding Friday that was accompanied by two dovish dissents, leaving Japan’s policy lagging behind a broadly hawkish shift among other major central banks.
Background & Context: Recent Monetary Moves and Market Sentiment
The BOJ’s hike contrasted with a Federal Reserve increase last week and with most peers signaling further tightening. A Nikkei newspaper report that Japan checked dollar/yen rates on the prior Friday suggested authorities were preparing for possible market intervention. Meanwhile, volatile oil prices—affected by U.S.-Iran diplomatic talks and President Donald Trump’s remarks at the United Nations—pulled crude below the $100 per-barrel mark, easing some inflation pressure but keeping the dollar index elevated.
Data & Statistics
- Dollar index: 100.59 (up 0.17% on September 22).
- Euro: $1.1441, down 0.18%.
- Markets price a 30% chance the BOJ will raise its short-term rate to 1.5% in October.
- Markets price a ?55% chance the Fed will lift its funds-rate corridor by 25 basis points to 4.0-4.25%.
- The US-Japan rate differential sits at roughly 275 basis points, supporting yen-funded carry trades.
- Options data for the week ending September 18 showed investors increasing long positions in the dollar index and short positions in the euro.
Official Statements & Responses
Federal Reserve Bank of Boston President Susan Collins posted on LinkedIn that she supported the recent rate increase, citing risks of inflation staying above the 2 % target. Richmond Fed President Tom Barkin said economic conditions in the United States may be firming and that inflation pressures stem from more than higher energy costs and tariffs. The Nikkei report of a rate check was interpreted by traders as a possible precursor to direct market intervention.
Verbatim Quotes
- “Unless the BOJ tightens policy more rapidly than the Federal Reserve, the approximately 275-basis-point US-Japan rate differential should continue to support yen-funded carry trades,” — Carlos Casanova, senior Asia economist at Union Bancaire Privée, in a note to clients
- “Obviously, the big bogeyman for everybody is inflation, but it's all been about why is there so much inflation?” — Juan Perez, senior director of trading at Monex USA in Washington