The Bank of Japan raised interest rates to 0.25% today, in line with our call but against consensus and market pricing. The BoJ also announced bond purchases will be nearly halved to around JPY 3tn by 1Q26, ING’s FX analyst Francesco Pesole notes.
JPY isn’t rallying for some reason
“The statement also stressed the inflationary risks of higher import prices, where the impact of a weak currency is greater. This surprise hike does fall into a generalized effort to stabilize the yen, in our view. USD/JPY swung after the release, and an attempted break lower was halted around the 151.6 (200-DMA support). The pair quickly bounced back and currently trades at 153.0, marginally above the pre-announcement levels.
“The lack of a post-announcement JPY rally must be associated with some lingering structural positioning in the yen, as speculators might have seen the rate hike as a near-term peak for the yen, and as an opportunity to re-enter carry-attractive trades below 152. Incidentally, consensus was probably in favor of a larger decrease in bond purchases, which have a bigger say on how far JGB yields can rise.
“Beyond the short-term, JPY looks on more solid ground, although watch for some JPY selling later today once FX intervention figures are released by the Ministry of Finance: an elevated figure could ignite speculation that the intervention strategy is unsustainable. The US events should determine the direction for USD/JPY near term, and we think that a retest of sub-152 levels remains possible.”
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD edges higher toward 1.0850 on renewed USD weakness
EUR/USD gains traction and rises toward 1.0850 in the second half of the day. Disappointing private sector employment data from the US weighs on the US Dollar and helps the pair push higher ahead of the Federal Reserve's policy announcements.
USD/JPY drops to multi-month lows below 150.00 after BoJ hike
USD/JPY stays under constant selling pressure and trades at its weakest level in over four months below 150.00. The Bank of Japan's unexpected rate hike and the renewed USD weakness ahead of the Fed's policy announcements forces the pair to extend its slide.
Gold price jumps above $2,400 on Middle East woes, hopes of dovish Fed
Gold price (XAU/USD) exhibits a strong performance in Wednesday’s European session and trades near $2,420. The US Dollar struggles to find demand and the 10-year US Treasury bond yield falls toward 4.1% ahead of the Fed policy decisions, fuelling the pair's upside.
Crypto Today: Bitcoin lags as Ethereum and XRP rally, Solana, Dogecoin and BNB trend among traders
Bitcoin trades sideways under $67,000 early on Wednesday, as BlackRock BTC ETF inflows are shadowed by Ether. Ethereum gears to test $3,500 resistance, extends gains by nearly 2%.
Federal Reserve Preview: All eyes on clues about the Fed's first interest rate cut in four years
The US Fed will announce monetary policy decisions following the July 30 - 31 policy meeting on Wednesday. Market participants widely anticipate that the US central bank will leave the policy rate unchanged at 5.25%-5.5% for the eighth consecutive meeting.