Markets price an 80% chance of a September BoJ rate hike, supporting JPY amid weaker US economic data and rising JGB yields.
The Japanese yen strengthened against the US dollar as markets bet on a Bank of Japan rate hike in September, despite weaker-than-expected GDP growth. Elevated pricing suggests an 80% probability of a 25-basis-point increase at the next meeting, with no official pushback from policymakers.
Japanese government bond yields rose, reflecting expectations for tighter monetary policy. Reports indicate government support for sooner rate hikes, countering concerns from weaker economic data. Analysts argue this, combined with softer US data, may limit further yen selling in the near term.
Traders focused on signals from the BoJ and government, reinforcing expectations for policy normalization. The lack of intervention to temper rate hike bets added credibility to the shift in market sentiment.