Yen squeezed as hawkish turn grips central banks

On Tuesday, the Japanese yen faced downward pressure as traders anticipated a hawkish stance from central banks worldwide, leaving Japan's interest rates far behind other major economies. The Nikkei reported that Japan had checked the dollar/yen rates on Friday, a move often indicating potential market intervention. After a dip on Monday, the yen traded at 157.33 versus the dollar early Tuesday.

Financial markets were buoyed by falling oil prices, while other currency pairs remained relatively stable, with the euro at $1.1467. The yen has been under pressure since the Bank of Japan's interest rate hike on Friday, which received two dissenting views, contrasting with the Federal Reserve's rate increase and the hawkish stance of most other central banks.

Analysts predict the dollar/yen rate to rise to 160 by the end of the year, potentially reaching 156 by mid-2027. The Reserve Bank of Australia's Governor Michele Bullock is expected to deliver a hawkish speech later in the day, with markets pricing a 90% chance of a rate hike next week. Sterling and New Zealand dollar also saw slight movements, with the pound at $1.3372 and the NZD at $0.5708.