21% chance BoJ hikes rates on 19 Dec!

  • The impact on yen pairs in financial markets if interest rates are raised could be significant.
  • The recent surge in Japanese yen against USD and GBP can be attributed to hints from BoJ policymakers about a possible shift from ultra-low interest rates.

There is currently a 21% probability that the Bank of Japan (BoJ) will raise interest rates during its upcoming meeting on December 19 as reported by Reuters. This would really send shockwaves through yen pairs on the day. 

Yesterday’s huge gains in the yen against the US dollar and British pound are just a glimpse of the possible volatility this action could cause. 

Yesterday BoJ policymakers may have suggested a potential shift away from their ultra-low interest rates. But are markets getting ahead of themselves and squinting just a little too hard into their crystal balls?  

Bank of Japan Governor, Kazuo Ueda mentioned that policy management would become “even more challenging from the year-end and heading into next year,”. The mention of the “year-end” has led to speculation that the central bank might move away from negative interest rates at its next policy meeting. 

The thing is: The BoJ has been dangling this possibility in front of traders ever since Ueda took up position as Governor. So, maybe a short play on the yen is still a possibility as the BoJ likely disappoints again during its next interest rate decision. 

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