Bank of Japan set to hike in December: Why the Japanese Yen is still weakening anyway
The Japanese Yen (JPY) remains under sustained pressure near multi-month lows as USD/JPY pushes above the 160.00 level for a second consecutive session, prompting official warnings from Japanese Finance Minister Katayama regarding one-sided and rapid foreign exchange moves.
The Japanese Yen continues to struggle near multi-month lows, with USD/JPY rising above the 160.00 level for the second consecutive day. Financial Minister Katayama issued official warnings about rapid, one-sided foreign exchange moves. Despite strong domestic economic activity and above-target inflation, expectations for a 25 basis point Bank of Japan (BoJ) rate increase in December are supported.
However, increased Federal Reserve tightening expectations are working against domestic policy support. Analysts are trying to determine whether technical breaks above 160.00 will sustain Yen weakness or if shifting interest rates will lead to a longer-term recovery for the Yen. Economists at DBS Group Research forecast Japan's Q3 real GDP to grow 0.8% QoQ, driven by AI-driven exports and wage-led consumption.
With export growth at 17% YoY, but the trade deficit widening to JPY1.2 trillion, inflation should push for a BoJ rate hike. USD/JPY has broken above its 200-day moving average and is now trading above 160.00 for the second day. The next key resistance levels are 160.40/160.70 and 162.20.
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