Yen strengthens on BOJ rate hike expectations

The Japanese yen continues to gain strength on expectations that the interest rate gap between the US and Japan will start to narrow. The Japanese yen, which has been rising in the last two weeks from its lowest levels since the 1980s when it fell against the dollar, continues to gain strength on expectations that the interest rate gap between the US and Japan will start to narrow. The yen gained nearly 1 percent against the dollar as of 07:38 this morning. Japan’s interventions in the market to support the yen, hedge funds reducing their positions against the currency and the unwinding of global carry trade transactions that had been pulling the yen down were effective in this rise. Whether the rise will continue seems to depend on the BOJ and Fed meetings to be held next week. Although it is not certain for the July meeting, it is expected that the Fed will cut interest rates and the BOJ will raise interest rates in the upcoming period. Wei Liang Chang, Macro Strategist at DBS Bank Ltd., said, “The yen is supported by the easing of carry trades due to increased risk aversion due to technology sales and the still intense speculative short positioning. “The anxiety among those who are short the yen is deepening with the possibility that Japanese monetary policy will tighten next week, in contrast to the Fed and ECB’s upcoming rate cuts. The possibility of a further yen strengthening at next week’s BOJ meeting cannot be ruled out,” he said. “We think the yen will become a bit more attractive, so we have reduced our short positions,” Andreas Koenig, London-based global head of FX at Amundi SA, Europe’s largest asset manager, said in an interview last week.