Yen Gives Back Most Gains as Fed Rate Hike Talk Intensifies

As market focus shifts from the Bank of Japan to Federal Reserve policy prospects, the yen came under pressure today, giving back most of the gains triggered by Kazuo Ueda's hawkish remarks. As of now, USD/JPY is trading near 158.29556, above the 200-day moving average; if sustained through the close, this would mark the first time since September 2 that it has held above this key technical level, indicating that the yen's earlier upward momentum has clearly faded.

**Policy Expectation Shift Weakens Yen Support**

The shift in market sentiment stems from a reassessment of the Fed's policy path. Previously, markets widely expected a rate-cutting cycle to begin soon, but the latest discussions suggest that some policymakers' cautious stance on inflation could keep rates higher for longer, with even some voices calling for hikes. This shift has directly boosted the appeal of dollar assets, undermining the yen's short-term safe-haven appeal as a low-yielding currency. Analysts note that the cost of supporting the yen is becoming increasingly high, while the effects last for shorter periods, with carry trade logic once again gaining the upper hand.

**Technical and Fundamental Factors Align**

USD/JPY's return above 158 not only directly reflects policy expectations but also breaks through the key 200-day moving average technical resistance. According to institutional observations, if the exchange rate can firmly hold above this average, bullish momentum may further accumulate. Meanwhile, although Japan's domestic inflation hovers around 3% to 4%, the ultra-low interest rate regime remains unchanged, with the interest rate differential disadvantage continuing to drag on the yen, making any rally driven by expectations of potential BOJ rate hikes appear fragile and short-lived.

**Outlook: "Super Central Bank Week" Awaits Verification**

Looking ahead, with the Bank of Japan, the Federal Reserve, and other central banks set to hold policy meetings in succession, markets will need to verify whether previous policy signals translate into concrete actions. If the final results confirm that rates will indeed stay higher for longer, the yen may face deeper adjustment pressure; conversely, if the meetings signal a dovish tilt, the yen could gain renewed breathing room. In any case, during this period of sharply swinging expectations, exchange rate volatility is expected to remain elevated.