Yen Rises Amid BoJ Rate Hike Speculation

(RTTNews) - The Japanese yen strengthened against other major currencies in the Asian session on Tuesday, as markets expect the Bank of Japan is likely to raise interest rates soon amid geopolitical tensions and US fiscal uncertainty.

Although board members were split during the BOJ's September policy meeting, many reaffirmed the need for an earlier rate hike from 0.50% to 0.75%.

The central bank is nonetheless under pressure to take swift action due to rising wage growth, sticky inflation, and a volatile government bond market. The 2-year JGB yield reached its highest level since 2008, at 0.935%. Speculation about a stricter BOJ policy was sparked by weak auction demand.

Investors are fretted over a possible U.S. government shutdown, which could start Tuesday midnight (local time) if Congress fails to reach an agreement.

A shutdown could delay releases of key U.S. economic data, including closely watched employment data for September, construction spending and possibly international trade data for August.

In other economic news, data from the Ministry of Land, Infrastructure, Transport, and Tourism showed that Japan's housing starts decreased for the fifth straight month in August. Housing starts dropped 9.8 percent yearly in August, following a 9.7 percent fall in July. Economists had expected a decrease of 5.2 percent.

The data indicated a decrease in new construction across all categories. The decline was more evident in the issued category, which tumbled by 67.5 percent.

The seasonally adjusted annualized number of housings starts declined to 711,000 in August from 712,000 in July.

Data also showed that construction orders received by the big 50 contractors surged 38.9 percent annually in August, reversing a 19.0 percent fall a month ago.

In the Asian trading today, the yen rose to 8-day highs of 173.92 against the euro and 185.86 against the Swiss franc, from yesterday's closing quotes of 174.34 and 186.37, respectively. If the yen extends its uptrend, it is likely to find resistance around 172.00 against the euro and 184.00 against the franc.

Against the pound and the Canadian dollar, the yen advanced to 1-week highs of 199.17 and 106.53 from Monday's closing quotes of 199.67 and 106.79, respectively. On the upside, 197.00 against the pound and 105.00 against the loonie are seen as the next resistance levels for the yen.

Against the U.S. and the New Zealand dollars, the yen climbed to a 6-day low of 148.23 and nearly a 1-1/2-month low of 85.79 from Monday's closing quotes of 148.62 and 85.90, respectively. The yen is likely to find resistance around 145.00 against the greenback and 84.00 against the kiwi.

Looking ahead, U.S. Redbook report, U.S. house price index for July, U.S. Chicago PMI for September, U.S. Consumer Board's consumer confidence for September and U.S. Dallas Fed services index for September are slated for release in the New York session.