The Japanese Yen saw a notable strengthening against the dollar, reaching 158.40 per dollar, following comments from Finance Minister Satsuki Katayama. She disclosed that US President Donald Trump had raised concerns about the yen's weakness during a meeting with Japanese Prime Minister Sanae Takaichi on the sidelines of the UN General Assembly. This disclosure triggered dollar selling and yen buying in the foreign exchange market, pushing the dollar-yen pair to around 158.33.
Katayama further stated that she would continue to coordinate with her US counterpart, Treasury Secretary Scott Bessent, on foreign exchange and other issues. This suggests a potential for increased US-Japan policy coordination regarding currency stability. Despite this, some analysts, like Charu Chanana from Saxo Markets, believe that without actual policy coordination, intervention, or clearer Bank of Japan tightening, the fundamental yen story might not change materially.
The yen's strengthening occurred after a period of weakening, with the currency nearing the closely watched 160 per dollar level. This weakening trend persisted even after both the Federal Reserve and the Bank of Japan had raised interest rates. The Bank of Japan recently hiked its policy rate to 1.25%, with Governor Kazuo Ueda signaling openness to further tightening, potentially a back-to-back hike in October or a larger move. However, the Fed's hawkish stance and projections for at least one more rate hike this year, with traders pricing in a 71% probability for an October 28 move, have continued to pressure the yen.
