US dollar advances vs yen as BOJ dissent clouds rate-hike outlook

The US dollar experienced an increase against the Japanese yen on September 18, following two dissenting voices from the Bank of Japan (BOJ) regarding a rate hike. This news left traders uncertain about the likelihood of additional rate hikes. The dollar's gains were later tempered by Japanese authorities checking rates within the currency market, seen as a prelude to potential intervention.

Despite the Bank of Japan raising rates to their highest level in 31 years at 1.25 percent, the yen did not benefit as traders felt there was insufficient explicit support for a hawkish stance. This decision, following a hawkish message from the US Federal Reserve earlier in the week, set the stage for further dollar strength, according to strategists.

The greenback saw a 0.5 percent rise, reaching 156.725 yen, marking its largest weekly rally since October 2025. Analysts noted the BOJ's underwhelming performance compared to expectations, with Finance Minister Satsuki Katayama hinting at further coordinated actions if necessary. The yen enjoyed a significant rally in early September, reaching its highest level since February, as traders speculated about multiple rate hikes by the BOJ.

However, by Friday, these forecasts were called into question. Market participants continued to focus on energy prices and the Federal Reserve's stance. The dollar index, which measures the currency against six major peers, rose 1.2 percent for the week, nearing a seven-week high, following the Fed's rate hike on Wednesday and expectations of further increases.

Traders estimate a 55 percent chance of a quarter-point hike at the Fed's upcoming meeting, up from 27 percent a week prior. Meanwhile, the euro gained 0.5 percent against the US dollar, and the British pound increased by 0.3 percent, following better-than-expected retail sales data. The Bank of England maintained its interest rates but signaled a potential increase.

In the cryptocurrency market, Bitcoin surged 5.9 percent to US$81,000, extending a recovery from a sharp sell-off on September 15 due to the US Senate's failure to pass comprehensive cryptocurrency legislation.