So far this week, the yen has outperformed other similar currencies as traders expect the yield gap between the U.S. and Japan to narrow next month.
On Wednesday, the yen rose as much as 0.8% against the dollar, reaching 151.84, and has surged 1.9% this week, ranking among the top in G10 currencies.
Strategists say the yen has further room to rise, as the current pricing of overnight index swaps indicates that the probability of both a Bank of Japan rate hike and a Federal Reserve rate cut exceeds 60%.
Kansai Mirai Bank currency strategist Takeshi Ishida stated that the market's focus on changes in benchmark interest rates in Japan and the United States is strengthening. He said, 'If both central banks change their policies, the yen could rise above the 150 level.'
Bank of Japan Governor Kazuo Ueda was seen as leaving the possibility for the Bank of Japan to raise interest rates next month during a speech last week, and since then traders have been preparing for a rate hike from the Bank of Japan next month. Although the minutes from the most recent Federal Reserve meeting showed broad support for gradual rate cuts, Minneapolis Fed President Neel Kashkari stated on Monday that considering another rate cut next month is still appropriate.
Carol Kong, currency strategist at Commonwealth Bank of Australia in Sydney, said, 'We expect the FOMC to cut rates in December and the Bank of Japan to raise rates, so there is still room for market pricing of the dollar-yen.'
The U.S. market will be closed on Thursday for Thanksgiving, resulting in lower trading volume than usual, which may exacerbate market movements.
Article forwarded from: Jin Shi Data
