The Bank of Japan is expected to increase interest rates next week following a surge in the Japanese yen.
The Bank of Japan is expected to raise interest rates next week, a move supported by an upgrade to Japan's second-quarter GDP estimates and the largest yearly rise in real wages in five years recorded in July. This anticipated rate hike has contributed to a surge in the Japanese yen, which reached its strongest levels since February.
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This movement in the yen is creating uncertainty for the yen carry trade, a popular strategy where investors borrow in Japan for low interest rates and invest in other markets, such as the U.S. stock market. A previous unwind of this trade could have caused significant market volatility. Global markets are showing signs of mixed results. While the Japanese yen, Chinese yuan, and South Korean won are gaining ground against the dollar, the Nikkei stock index recoiled by nearly 2% on Tuesday. Meanwhile, copper prices hit an all-time high on Monday, and China's exports rose 25% year-on-year in August.
Sources
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Why a stronger Japanese currency could spell trouble for AI and technology stocks
MarketWatch
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Morning Bid: Yen at work
Yahoo Finance