FX.co ★ Japanese Yen Stays Range-Bound

The Japanese yen held steady around 158.9 per dollar on Monday, supported by rising expectations of an early interest rate hike by the Bank of Japan. Markets are now assigning roughly an 82% probability to a rate increase in September, a sharp jump from about 23% before the BOJ’s July meeting. The widely anticipated move would lift the policy rate to 1.25% from the current 1%.

Investors are closely watching a speech by Deputy Governor Ryozo Himino on Thursday for further signals on the timing and pace of monetary tightening, as the recent acceleration in Japanese inflation has strengthened expectations for continued policy normalization. At the same time, broad weakness in the US dollar—driven by concerns over the US Treasury’s expanded long-term bond buyback program—has further bolstered demand for the yen.