The Japanese yen strengthened toward 160 per dollar on Tuesday, rebounding from the previous session’s losses as investors looked ahead to the Bank of Japan’s upcoming policy decision. The central bank is widely expected to raise its benchmark interest rate by 25 basis points to 1%, aiming to rein in inflation and bolster the currency.
The yen has come under sustained selling pressure in recent weeks as traders expanded short positions, driven by persistent carry trades that involve borrowing in Japan’s low-yielding currency to invest in higher-yielding assets abroad. This dynamic underscores the wide interest rate differential between Japan and the United States, which has largely offset the BOJ’s gradual policy tightening and repeated currency intervention efforts by Tokyo.
Investors are also closely watching geopolitical developments, amid expectations that the United States and Iran will sign a peace agreement in Switzerland on Friday—a step that could pave the way for reopening the Strait of Hormuz.
