The yen hit its strongest level against the dollar since December, beating all major currencies’ performances on Thursday amid growing speculation the Bank of Japan will hike rates sooner rather than later.
Japan’s currency climbed as much as 0.7% to ¥150.46 against the dollar, a level it hasn’t touched since Dec. 9. Government bond yields are also on the rise, with the 10-year benchmark hitting its highest level since 2009. Overnight index swaps are pricing in an 83% chance of a rate hike by the central bank’s July meeting, compared with about 70% odds at the start of this month, with a hike now seen as certain by September.
BOJ Board Member Hajime Takata said on Wednesday that it’s important to continue considering gradual rate hikes, while also noting that Japan’s bond yields are moving in line with the market’s view of the economy. Japan’s recent data has also supported the BOJ’s case for raising rates, with gross domestic product outperforming forecasts and nominal wages jumping by the fastest pace in nearly three decades.
