Yen Rises After BoJ Sato's Hawkish Remarks

(RTTNews) - The Japanese yen strengthened against other major currencies in the European session on Wednesday, following hawkish remarks by Bank of Japan (BoJ) board member Ayano Sato.

Earlier today, Sato, a dovish-leaning policymaker and one of the two committee members who voted against the rate hike in September, shocked investors by indicating that he was open to additional monetary tightening.

In an interview with Kyodo News, the BoJ policymaker confirmed that she is in favor of "tuning gradually" the bank's monetary policy and that higher rates "may contribute to attaining sustainable economic growth."

However, the strength of the US dollar generally and rising oil prices are limiting Yen advances thus far.

European shares drifted lower with renewed Middle East tensions and France's deepening fiscal crisis keeping investors on edge.

Brent crude futures traded above $101 a barrel following more attacks on vessels in the Persian Gulf region.

German, French and Italian bond yields jumped as investors refocused on fiscal worries.

Yields rebounded on fears Iran is stepping up attacks on tankers in the Strait of Hormuz.

In a statement on the social media platform X, Yemen's Houthi group claimed that it carried out a series of drone and ballistic missile attacks targeting airports and military installations in Saudi Arabia.

Also, the Houthis denied being pushed back by government forces after Yemen's military said it had removed the pro-Iran group from areas around the Bab al-Mandab strait - a Red Sea chokepoint - and the port city of Mocha.

In economic news, data from the Cabinet Office showed that Japan's leading index improved in August to the strongest level in just over twelve-and-a-half years. The leading index, which measures future economic activity, climbed to 118.0 in August from 117.6 in the previous month. The expected reading was 118.1. Moreover, this was the highest score since January 2024, when it was 119.4.

The coincident index that measures the current economic situation dropped to 118.7 in August from 120.6 a month ago.

The lagging index stood at 112.1 in August, down from 113.0 in the previous month.

In the European trading today, the yen rose to a 6-day high of 189.53 against the Swiss franc and a 2-day high of 176.55 against the euro, from early lows of 190.38 and 178.31, respectively. If the yen extends its uptrend, it is likely to find resistance around 187.00 against the franc and 175.00 against the euro.

Against the pound and the U.S. dollar, the yen advanced to 208.90 and 157.85 from and early 2-week low of 210.21 and nearly a 2-week low of 158.51, respectively. The yen may test resistance around 214.00 against the pound and 156.00 against the greenback.

Against Australia, the New Zealand and the Canadian dollars, the yen climbed to 109.95, 88.46 and 110.95 from an early 8-day low of 110.65, a 6-day low of 89.08 and nearly a 2-week low of 111.52, respectively. On the upside, 108.00 against the aussie, 87.00 against the kiwi and 109.00 against the loonie are seen as the next resistance levels for the yen.

Looking ahead, U.S. EIA crude oil data and U.S. consumer inflation expectations for September are slated for release in the New York session.