Japanese Yen Soars to Four-month High after Raising key Rate to 0.25%

The yen reached its highest level in more than four months on Wednesday after Bank of Japan Governor Kazuo Ueda indicated the possibility of raising interest rates more times after he had already raised them and revealed a plan to reduce his massive bond purchasing program.

The yen rose by about 1.8%, falling in dollar terms during the day to the level of 150.05 yen per dollar, and the Japanese currency recorded its highest level since March.

Ueda left the door open to raising interest rates more times this year, and said that the central bank does not see the 0.5% level as a “major barrier” to raising interest rates.

Earlier today, Wednesday, the Bank of Japan raised the key interest rate to 0.25% from a rate between zero and 0.1% following a two-day monetary policy meeting, and announced that it would reduce monthly bond purchases by almost half to 3 trillion yen ($19.88 billion) in the period. From January to March 2026.

It appears that the yen is heading to end the month of July with gains of more than 6%, its largest monthly increase since its rise of 7.2% in November 2022, supported by state intervention and a decline in demand for interest rate differential deals before the bank’s decision. Japan.

Data on Wednesday showed that inflation in the euro zone rose unexpectedly in July, while the price increase index in the services sector declined.

The Australian dollar fell to its lowest levels since May after core inflation recorded a lower rate than expected, which significantly reduced the chances of raising interest rates again.

The Australian dollar fell 0.6% to $0.6497 in the latest trading, after falling approximately 0.9% to its lowest level in 3 months at $0.6480 following the Consumer Price Index data, which means that it is heading towards a monthly loss of 2.5%.

The euro rose 0.2% to $1.0833, heading for a gain of about 1% in July, supported by a significant decline in the dollar.

The British pound settled at $1.28375 and is heading for a monthly increase of 1.5%.

Traders are awaiting the Federal Reserve's (US central bank) decision on interest rates, which is likely to be the next major catalyst for currency movements. The central bank is expected to hold interest rates but will lay the groundwork for a rate cut in September.

The dollar index fell 0.3% to 104.12 points, and is on track to record a monthly loss of 1.5%.