The yen weakened to a two-week low on Thursday after the Bank of Japan's latest policy summary showed policymakers split over how fast to raise rates. The U.S. dollar, meanwhile, held near a two-month high, extending its strongest monthly run since June.
The USD/JPY pair rose 0.5% to 158.24, pushing the yen toward its weakest level in two weeks, after the BOJ's September meeting summary revealed disagreement among board members on the pace of further rate hikes.
BOJ policymakers split on the rate path
Some board members argued the central bank should accelerate rate hikes or bring rates closer to its eventual target sooner. Others countered that although second-quarter growth was positive, domestic demand contracted, and the economy could not necessarily be described as expanding strongly or sustainably.
As a result, markets now price less than a 20% chance of a BOJ hike by October 30, down from more than 30% at one point Wednesday, while a December increase is fully priced. DBS said Japan should continue to benefit from strong external demand linked to AI even as the monetary-policy outlook stays uncertain.
Dollar holds near a two-month high
The U.S. dollar index stood around 101.62, up 0.2%, after gaining about 2% in September for its strongest monthly performance since June. Elevated Treasury yields kept supporting the greenback, even as softer-than-expected U.S. inflation and downward revisions to July's reading reduced expectations for an October Federal Reserve hike.
The euro felt similar pressure. The EUR/USD pair fell 0.1% to 1.13, adding to a nearly 2.5% decline in September, its steepest monthly loss since July 2025. Concerns over Europe's debt outlook, higher energy prices and a sharp rise in euro-zone inflation have weighed on the currency. That backdrop has added to expectations that the European Central Bank may need to keep policy tight.
Underneath the currency moves, global bonds suffered their largest monthly decline in years in September, a combination of deteriorating government finances, heavy debt issuance and renewed inflation pressures.
Source: Investing.com
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