BOJ Rate Hike, US Election Jitters Fuel Yen's Rally

11 Sep 2024 , 11:26 AM

The safe-haven yen rose to its highest level versus the dollar since the beginning of the year on Wednesday, as U.S. presidential candidates Kamala Harris and Donald Trump hurled barbs in the sole scheduled debate before November’s election.

The yen gained an additional support from Bank of Japan board member Junko Nakagawa, who underlined in a speech on Wednesday that the central bank would continue to hike interest rates provided the economy and inflation met its predictions.

Traders were also cautiously awaiting a major U.S. inflation report, which might provide signals on how forcefully the Federal Reserve would lower rates next week.

The dollar fell as much as 0.68% to 141.50 JPY, a low not seen since January 2, before trading at 141.56 yen.

The dollar-yen pair typically tracks long-term Treasury rates, which extended its overnight drop in Asian time to 3.625% for the first time since June 2023.

Investors expect the dollar to strengthen in the case of a Trump victory, as tariffs might support the currency and more fiscal spending could raise interest rates.

The BOJ is widely expected to keep interest rates unchanged on September 20, although a narrow majority of economists polled by Reuters last month forecast more tightening by year-end.

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