USD/JPY Falls Below 157! Yen Becomes Strongest G-10 Currency as Market Bets on Another Rate Hike Next Month

Wednesday saw the yen strengthen against the dollar, with USD/JPY falling below the 157 mark, as a series of warnings from the Japanese government over the exchange rate and quarter-end fund flows provided support for the yen. During Asian morning trading, the yen rose as much as 0.6%, with USD/JPY touching 156.38, making the yen the best performer among G-10 currencies. Japan's top currency official, Atsushi Mimura, told Reuters on Monday that the Japanese Prime Minister, the Finance Minister, and the U.S. side have recently sent "very clear" messages regarding the yen's depreciation. Japanese Prime Minister Sanae Takaichi also said that U.S. President Trump expressed the same concern about yen weakness when they met last week. OCBC strategist Moh Siong Sim said: "The market seems to be gradually embracing the view that policy may shift toward being more supportive of the yen. Since Trump expressed concern about yen weakness, the yen has remained firm since the start of this week." Market speculation about further rate hikes by the Bank of Japan is heating up. After raising the benchmark rate to 1.25% earlier this month, the BOJ could hike again as early as next month. So far this quarter, the yen has appreciated by about 3.6%. This follows Japan and the United States conducting their first joint intervention in 15 years in July to support the yen. Shinya Koike, section chief of the Global Markets Trading Department at Sumitomo Mitsui Trust Bank, said quarter-end fund flows may also be one of the reasons for the yen's rise.