The Bank of Japan published a summary of opinions from the September meeting, and the market saw no signal in the document for a rate hike as early as October. Against this backdrop, the yen lost about 0.5% against the dollar, and USD/JPY rose to 158.44. An additional factor was confirmation from Japan's Ministry of Finance that no currency interventions had been conducted for more than a month.
What the Bank of Japan summary showed
The summary of opinions reflects the positions of Bank of Japan board members after the September 17-18 meeting. The document notes that core inflation is approaching the 2.0% target, and monetary policy is gradually shifting toward managing the risk of exceeding this target. At the same time, the market did not receive a direct signal for a rate hike as early as October.
How the yen reacted
After the publication, the yen weakened by about 0.5%. USD/JPY rose to 158.44. A day earlier, the pair recovered its intraday decline and closed almost unchanged around 157.41. The absence of a more hawkish signal from the Bank of Japan reinforced expectations that the next rate hike may come later.
No interventions for more than a month
Japan's Ministry of Finance confirmed that no currency interventions were conducted from August 27 to September 28. An intervention is a direct purchase of yen by the government on the foreign exchange market to support the exchange rate and slow its weakening. For comparison, in July there was a large joint operation by the US and Japan worth $98.7 billion. The absence of interventions over the past month was perceived by the market as an additional factor in favor of further yen weakening.
What's next for the rate
MUFG expects the next Bank of Japan rate hike in December. After the September meeting, the regulator signaled that it was ready to continue gradual policy tightening, but the market does not yet see a sufficient signal for a move as early as October. Two opposing forces are currently at play for USD/JPY. On the one hand, later rate hike expectations support the pair's growth. On the other hand, the higher USD/JPY rises, the more the risk of currency intervention by Japanese authorities returns.
Did you trade the yen this session?
Such moves in the yen often occur after overnight publications, when part of the movement has already happened by the start of the main trading session. In prop trading, it is important to consider not only the market direction, but also the rules of a specific program. In some places, news trading is allowed, in others, trades at the moment of data publication are restricted. Daily drawdown is also calculated differently across programs. It is better to check this before buying a challenge, not after violating the account terms.