Japan, Sep 22 : The Japanese yen remained under pressure against the US dollar on Tuesday as traders assessed the widening interest rate gap between Japan and other major economies amid a shift towards tighter monetary policy among global central banks.
The yen was trading at around 157.33 per dollar in early Asian trade. Market activity was relatively subdued due to a holiday in Japan and concerns that Japanese authorities could intervene to support the currency.
The yen received some support after reports that Japanese officials had checked dollar yen rates on Friday, a move often seen as a possible warning ahead of currency-market intervention. However, the currency has otherwise remained weak since the Bank of Japan raised interest rates last week, with two policymakers dissenting from the decision.
The BOJ’s stance contrasted with the US Federal Reserve and several other central banks, which have maintained a more hawkish outlook and signalled that further rate increases could be considered.
The interest-rate gap remains a major factor weighing on the yen. Analysts estimate the US-Japan rate differential at about 275 basis points, encouraging investors to borrow in yen and invest in higher-yielding currencies.
Markets are currently pricing around a 30 per cent probability of a BOJ rate increase to 1.5 per cent in October. At the same time, traders see roughly a 55 per cent chance of the Federal Reserve raising its policy-rate range by 25 basis points to 4 per cent-4.25 per cent.
The Australian dollar was little changed near $0.7120 ahead of comments by Reserve Bank of Australia Governor Michele Bullock. Markets were assigning a high probability to another Australian rate increase next week, which would be the fourth hike this year.
The euro was trading around $1.1467, while sterling stood near $1.3372. The New Zealand dollar remained close to multi-month lows at around $0.5708 as its comparatively lower interest rates continued to make it less attractive to investors seeking higher returns.
Analysts at ANZ said the New Zealand dollar remained vulnerable as higher-yielding currencies benefited from stronger carry-trade demand. They noted that even with expectations for several additional rate increases, New Zealand’s policy rate would remain below US and Australian rates.
Meanwhile, falling oil prices provided some support to broader financial markets, while cryptocurrencies gained ground. Bitcoin climbed above $87,000 to reach an eight-month high.