Yen Rises Amid BoJ Rate Hike Speculation

(RTTNews) - The Japanese yen strengthened against other major currencies in the European session on Monday, as traders expect that the Bank of Japan or the BoJ is likely to raise its interest rates soon in the next month's policy meeting.

Minutes from the Bank of Japan's July 30 to 31 meeting revealed broad agreement on rising inflation risks, raising speculation the central bank could raise its benchmark rate for a second straight month when the board meets in October.

According to minutes from the Bank of Japan's July monetary policy meeting, which were made public earlier today, policymakers discussed the necessity of raising interest rates more quickly in light of growing concerns about the dangers of inflation. Expectations that the BoJ will rise once again as soon as October or December increased as a result.

In addition, concerns about impending intervention strengthened the JPY.

The European stocks traded lower due to continued uncertainty over the end to the U.S.-Iran war in the Middle East after U.S. President Donald Trump rejected Iran's latest proposal to reopen the Strait of Hormuz and signaled possible new military strikes after midterm elections.

While Trump said he expects negotiations to resume this week. Iran said it would not soften its conditions.

Iran's Foreign Minister Abbas Araghchi expressed hopes for a diplomatic solution, but warned the country is prepared for war with the United States to resume.

"We are fully prepared for the war to be resumed. We stand firm in the face of any new aggression, even if it comes to a doomsday war," Araghchi told NBC News.

Meanwhile, Trump said he is still looking "very seriously" at implementing a U.S. ban on diesel exports to combat high prices, which could help lower U.S. diesel prices initially and lift European wholesale cots by about 2 percent.

Rising U.S. Treasury yields may also keep investors on edge after several Federal Reserve officials flagged more tightening ahead, citing resilient economic growth and a strong labor market.

Cleveland Fed President Beth Hammack said on Friday that "the biggest risk with inflation is the formation of an inflationary mindset and the public has been dealing with above-target inflation for an extended period."

Investors are pricing in another interest rate hike from the Federal Reserve before year-end.

In the European trading today, the yen rose to a 10-day high of 156.52 against the U.S. dollar and a 2-week high of 207.69 against the pound, from early lows of 157.86 and 208.99, respectively. If the yen extends its uptrend, it is likely to find resistance around 154.00 against the greenback and 206.00 against the pound.

Against the euro and the Swiss franc, the yen advanced to near 2-week highs of 178.20 and 188.48 from early lows of 179.73 and 190.29, respectively. The yen may test resistance around 176.00 against the euro and 187.00 against the franc.

The yen climbed to a 10-month high of 88.69 against the NZ dollar, from an early low of 89.52. On the upside, 87.00 is seen as the next resistance level for the yen.

Against the Australia and the Canadian dollars, the yen advanced to 2-week highs of 109.91 and 110.58 from early lows of 110.89 and 111.52, respectively. The next possible upside target for the yen is seen around 108.00 against the aussie and 109.00 against the loonie.

Looking ahead, U.S. Dallas Fed manufacturing index for September is due to be released in the New York session.