Yen Breaks Below 155 on BOJ Rate-Hike Bets

The break below ¥155 was especially important because that level had acted as a floor after past intervention episodes, according to State Street Investment Management senior fixed income strategist Masahiko Loo. He said the move helped trigger stop-loss orders and forced options dealers to sell dollars as barriers were breached, intensifying the rally.

The shift is being driven by growing expectations that the Bank of Japan will keep raising interest rates, a sharp contrast with recent weeks when investors questioned whether coordinated intervention by Tokyo and Washington could hold back the dollar. Speculation that the Government Pension Investment Fund may adjust its asset mix has also lent support, as have month-start portfolio rebalancing flows from real-money accounts.

Options pricing shows traders are paying up for further volatility around the BOJ and Federal Reserve meetings, with hedging costs for yen strength near cycle highs and overall volatility hitting the highest level since January. That suggests investors are not treating Monday’s move as a one-day squeeze, but as a potential turning point for the currency.

Japan’s top foreign exchange official Atsushi Mimura said Friday there was “no change” in the government’s stance on the yen even as it strengthened, keeping intervention risk in focus if the dollar rebounds. For investors, the key question is whether BOJ rate-hike expectations keep building enough to extend the yen’s gains or whether the move stalls once short covering fades.