USD/JPY: Dollar Regains ¥150 as Yen Traders Brace for Interest Rate Hold by Bank of Japan

Dollar-yen peaked back above ¥150 — the first such pop since August — as forex markets price in a yen-bruising interest rate hold by the Bank of Japan.

• The USDJPY pair is on the run again. Shortly after the yen touched its highest level to the dollar in September, traders switched sides and sold it off. Big time. The dollar has gained more than 5% against the Japanese currency over the past month and on Friday just shattered the psychological level of ¥150. It was a level not seen since before thin summer trading, which sent the yen rallying (and traders learned about something called “carry trade.”)
• Things have changed and now it’s fashionable to be a yen bear again. For one key reason — the Bank of Japan isn’t doing what’s needed to support the valuation of its currency. More precisely, it’s not considering increasing interest rates to support the yen and restrict the money flow in the economy. Instead, Japan’s central bank has vowed to keep its monetary policy loose, easy and accommodative.
• Against that backdrop, traders are pricing in a non-eventful Bank of Japan meeting on October 31. That’s when central bank officials will gather to decide what to do with interest rates. Japan’s new Prime Minister, Shigeru Ishiba, knocked the yen after he urged the Bank of Japan to keep rates flat, switching from a previous pro-hike stance. Expectations are building for a no-hike, wait-and-see approach that will mean the Japanese yen’s outlook will remain wobbly and uncertain.