The Japanese yen briefly strengthened beyond 160 per dollar on Monday but remained close to one-month lows, as the US currency advanced on the back of hawkish comments from Federal Reserve Chair Kevin Warsh that reinforced expectations of a rate hike in September. Markets are now assigning roughly a 57% probability that the Fed will raise interest rates by 25 basis points next month, up from about 40% a week earlier.
At the same time, traders are increasingly positioning for a possible Bank of Japan rate hike in September amid mounting concerns over yen weakness and import-driven inflation. The yen has surrendered more than half of the gains it made after the joint Japan–US currency market intervention in late July, with persistent structural vulnerabilities still weighing on the currency.
Additional pressure on the yen stems from wide interest rate differentials, rising fiscal concerns in Japan, and elevated oil prices linked to the ongoing conflict in the Middle East.
