The Japanese yen strengthened to around 159 per dollar on Wednesday, breaking a two-day losing streak as oil prices extended their decline amid hopes for renewed diplomatic efforts in the Middle East, easing near-term inflation concerns. The currency was also supported by a weaker dollar as investors positioned ahead of a key US inflation report and a speech by Federal Reserve Chair Kevin Warsh later this week.
On the domestic front, former Bank of Japan board member Seiji Adachi said the central bank is likely to raise interest rates next month and again as early as January, warning that keeping rates on hold could trigger another yen selloff and fuel import-driven inflation. Markets are currently pricing in roughly an 80% chance that the BOJ will lift its policy rate by 25 basis points to 1.25% next month, a sharp increase from about 23% before the bank’s July meeting.
Meanwhile, BOJ Governor Kazuo Ueda will not attend the Federal Reserve’s annual Jackson Hole symposium this week due to a scheduling conflict.
