Yen squeezed as hawkish turn grips central banks

The Japanese yen faced pressure in global markets on Tuesday as traders anticipated a hawkish stance from central banks worldwide. Despite a holiday in Japan, the currency struggled to keep pace with higher interest rates set by major economies. The Nikkei reported that the Bank of Japan had checked dollar/yen rates on Friday, a move that typically signals potential intervention.

The yen traded at 157.33 against the dollar early Tuesday, while other currencies remained mostly stable, buoyed by falling oil prices. The euro traded at US$1.1467, while cryptocurrencies, notably bitcoin, rose to an eight-month high above US$87,000. Following the BOJ's interest rate hike on Friday, the yen faced additional pressure due to dissenting opinions within the central bank.

Analysts expect the US dollar to rise against the yen to around 160 by year-end, with a 30% chance of the BOJ raising rates to 1.5% in October and a 55% chance of the Federal Reserve increasing its rate window to 4% to 4.25%. Meanwhile, the Reserve Bank of Australia is expected to adopt a hawkish stance during a fireside chat on Tuesday, with a 90% chance of a rate hike next week, while New Zealand's dollar remained near multi-month lows due to its lower interest rates compared to peers.