The Japanese yen rose in Asian trading on Wednesday against a basket of major and minor currencies, resuming the gains that briefly paused yesterday versus the US dollar and moving toward retesting a two-week high. The advance comes as markets price in the possibility of a Bank of Japan rate hike later this month.

More hawkish comments from BOJ Governor Kazuo Ueda have opened the door to near-term policy normalization, with investors awaiting further evidence on whether Japan will raise interest rates in December.

Price Overview

USD/JPY dipped about 0.2% to 155.61 from an opening level of 155.86, after recording an intraday high of 155.90.

The yen ended Tuesday down 0.3% versus the dollar, its first decline in four sessions, as traders took profits following Mondays jump to a two-week high at 154.66.

Kazuo Ueda

BOJ Governor Kazuo Ueda offered a more optimistic outlook for Japans economy on Monday, saying the central bank will assess the pros and cons of a rate hike at its upcoming December policy meeting.

Analysis

Christopher Wong, FX strategist at OCBC, said the latest communication appears to be early signaling ahead of a potential rate increase, making a December or January hike highly plausible.

He added: The question is whether this will be a one-and-done move followed by a long pause. A sustained yen recovery likely requires the BOJ to continue signaling a firmer tightening stance.

Japanese Interest Rates

Sources told Reuters the Bank of Japan is preparing markets for a potential December rate hike, reviving its earlier hawkish tone as concerns return over the yens sharp depreciation and as political pressure to keep rates low fades.

Market pricing currently assigns roughly a 60% probability to a 25-basis-point rate hike in December.

Investors are awaiting fresh data on inflation, unemployment, and wage trends in Japan to reassess these expectations.