Yen Up Near 4% This Month: Why a Fed Hike Could Force BOJ's Hand

The yen’s four-week climb collides with the Federal Reserve’s Wednesday rate decision. The size of the Fed’s move could decide whether Tokyo’s currency gains hold or reverse. The yen traded at 153.49 per dollar on Monday, just off the 152.89 seven-month high reached last week.

Speculators turned net-long on the yen for the first time since February, marking a shift in positioning. Why the Fed Comes First Consumer prices in the U.S. accelerated in August, based on data released Friday. Traders now price Fed rate hike odds at 86% for Wednesday.

That figure comes from the CME FedWatch tool, which estimates odds using futures pricing. The Bank of Japan meets two days later, on Friday. MUFG analysts said a quarter-point hike is already largely priced into markets.

However, the bank said the yen needs a signal of faster future hikes to strengthen further. The Yen has held onto its gains made since the unprecedented US intervention.