The Japanese yen rose in Asian markets on Wednesday against a basket of major and minor currencies, extending its gains for a third straight day against the US dollar, and recording a three-week high, thanks to growing hopes that the Bank of Japan will implement a third increase in Japanese interest rates when it meets next December.
The rise in the Japanese currency was also supported by the weakness in the yield on the US 10-year Treasury bond , after the minutes of the Federal Reserve meeting increased the chances of a 25 basis point cut in federal interest rates during the December meeting.
Price overview
The Japanese yen exchange rate today recorded a decline of 0.55% against the dollar to reach 152.25 yen , the lowest level since November 8, compared to the opening price of today's trading at 153.08 yen , while it recorded the highest level at 152.23 yen .
The Japanese yen rose 0.7% against the US dollar on Tuesday, posting its second straight daily gain on concerns over global trade tensions.
Japanese interest
Bank of Japan Governor Kazuo Ueda said last week that the economy was moving toward sustainable inflation driven by wage growth, warning against keeping borrowing costs too low.
Against the backdrop of these statements, the probability of the Bank of Japan raising interest rates by a quarter of a percentage point at the December 19 meeting rose from 54% to 60%.
In a Reuters poll conducted between Nov. 13 and 21 and published last Friday, 56 percent of economists, or 29 out of 52, said the Bank of Japan would raise borrowing costs again by the end of the year, compared with 49 percent in a poll conducted last month.
About 90% of economists, or 44 out of 49, expect the Bank of Japan to raise interest rates to 0.50% by the end of March 2025.
US bond yield
The yield on the 10-year US Treasury note fell 0.3% on Wednesday, reaching a level close to its lowest level in four weeks at 4.261% . This decline put negative pressure on the US dollar.
Minutes of the Federal Reserve's latest meeting, released on Tuesday, indicated that a large number of US monetary policymakers agreed on the need to gradually reduce interest rates.
Following the release of the minutes, according to the CME Group's FedWatch tool, the odds of a 25 basis point rate cut at the December meeting rose from 52% to 67%, while the odds of keeping rates unchanged fell from 48% to 33%.
Reflections on the Japanese Yen
The narrowing of the current gap in long-term bond yields between Japan and the United States is enhancing the attractiveness of Japanese yields as an investment target for short sellers and investors financing deals. This development supports the appreciation of the Japanese yen exchange rate and increases its strength against the dollar.
