The yen extended its rally against the dollar (USD/JPY) for a fourth consecutive session on Tuesday, hitting 147.16, its strongest level since mid-September. Investors are positioning for the possibility that the Bank of Japan (BOJ) could tighten monetary policy in 2024 while the Federal Reserve loosens.
The dollar has fallen 0.61% against the yen to 147.45 as of Tuesday. The dollar index, which measures the greenback against six major currencies, dropped to its lowest since late August at 103.17 and was last 0.13% lower at 103.32.
Analysts say momentum is growing around the idea that the BOJ could exit its ultra-loose policies, possibly ending negative interest rates next year. This is encouraging investors to unwind bets against the yen.
U.S. Treasury yields have also tumbled as markets bet the Fed will cut rates in 2024 after inflation slowed in October. This has dragged the dollar index down from a near-one-year high in early October.
The Fed’s meeting minutes are due later today, which could provide insight into policymakers’ thinking. Markets will also be watching a speech by ECB President Christine Lagarde. While the dollar’s downward momentum has traction, some warn Fed pushback on market rate cut bets could stall its slide.