Yen Ticks Lower After Strong Week, BOJ and Fed Decisions Eyed

Yen Ticks Lower After Strong Week, BOJ and Fed Decisions Eyed

The yen weakened slightly on Monday after a week of strong gains against the dollar. The Japanese currency had surged to its highest level in 12 weeks against the greenback, driven by a recovery in equity markets that reduced demand for the yen as a safe haven.

Traders are now looking to central bank decisions in Japan and the U.S. for further direction. The Bank of Japan (BOJ) is expected to announce its quantitative tightening (QT) plans on Wednesday, while the Federal Reserve is widely expected to leave rates unchanged this week.

Speculation has grown that the BOJ will raise interest rates on Wednesday, potentially leading to a "sell-the-rumor, buy-the-fact" reaction in USD/JPY if it holds off on hiking rates. Meanwhile, the Fed is expected to cut rates by a quarter point at its September meeting.

Demand for the yen could easily reignite if stocks turn lower, with the U.S. earnings calendar this week featuring heavyweights like Amazon, Apple, Meta, and Microsoft.

Elsewhere, the euro gained against the yen and was flat against the dollar. The Australian dollar also gained ground, recovering from Friday's low. Leading cryptocurrency bitcoin advanced 2% after positive comments from Republican presidential candidate Donald Trump.