USD/JPY: Yen Gains 0.8% Against Dollar as BoJ Finally Hikes Rates by 25 Basis Points

After months of waiting and hoping, traders finally got what they wanted — a rate hike in Japan. But the yen didn’t really do much. Why?

🏔️ Bank of Japan Hikes Rates

• The USDJPY pair dropped about 0.8% Friday morning moments after the Bank of Japan raised interest rates by 25 basis points to their highest level since 2008. The yen gained about 120 pips against the weaker dollar but it wasn’t an outstanding performance by any means.
• The Bank of Japan’s move to hike borrowing costs to the current level of 50 basis points was expected by traders globally, which would explain the subsequent rebound from the session low of ¥154.90 to ¥155.60 — almost no daily gain.

🤷🏼‍♀️ More Rate Hikes? IDK Maybe

• There weren’t clear indications in BoJ governor Kazuo Ueda’s speech as to whether the central bank intends to raise rates again soon. Ueda vowed to monitor the situation and assess if another bump in interest rates will be needed.
• The yen’s non-reaction to this hike might be good news for the Bank of Japan — too quick a rise could send import prices lower and complicate the path to more rate hikes.

💰 Dollar Keeps Rivals on Their Toes

• There’s also the other end of the trade. The US dollar is dominating the forex board now that Trump is on a spree to sign as many executive orders as he can. Tariffs are coming to adjacent nations (and China), while sweeping deregulation seeks to unleash more economic growth.
• All that is in theory highly bullish for the greenback and naturally traders have piled their long bets on the sustained upside swing in the American currency.