Yen weakens past 140 per dollar as traders see another Fed hike

Traders fully priced in another quarter-point rate increase by the Fed within the next two policy meetings and a more than one-in-two chance that a hike could come as soon as next month. That contrasts with the Bank of Japan’s policy as Governor Kazuo Ueda has repeatedly said he will patiently continue with monetary easing.

Ueda indicated his desire to hold on to policy flexibility by playing down the importance of wages or any single economic dataset as a trigger for change. He did not rule out a policy shift even if inflation is below two percent.

“The latest string of remarks did not present anything new,” Barclays chief yen rates strategist Shinji Ebihara writes in note. “We still believe the latest remarks as a whole suggest the BOJ is unlikely to make early policy revisions.”

In the US, the yield on the two-year note surged 16 basis points to 4.53 percent on Thursday before trading little changed in Asia trading Friday. The yield on similar-maturity Japanese bond fell 0.5 basis points on Thursday to -0.070 percent, while the 10-year yield rose two basis points to 0.455 percent.

The move also came on hints of optimism about a potential debt-ceiling deal and economic data suggesting resilience. US officials have failed to resolve their debt-cap impasse even after Fitch Ratings warned that the nation’s AAA rating was under threat from the standoff.

“The move to 140 is really a dollar story, not a yen story,” said Bipan Rai, a currency strategist at Canadian Imperial Bank of Commerce.