Yen Slumps to Over One-Month Low on Fed Hike Bets

By Megumi Fujikawa

TOKYO--The yen weakened to the lowest level in more than a month against the dollar on Wednesday, after stronger-than-expected U.S. inflation data raised expectations for Federal Reserve interest-rate hikes.

A more aggressive Fed stance that widens the U.S.-Japan rate gap is a drag on the yen as it makes the currency attractive for so-called carry trades, where investors use a cheap currency to buy higher-yielding assets.

The Japanese currency touched 158.96 against the dollar in morning Asian trade, its weakest level since late September.

The greenback meanwhile was boosted by a chorus of hawkish-sounding comments from Fed officials.

Ahead of the inflation data, Fed Governor Christopher Waller said the central bank should weigh a half-point rate hike next month if October core inflation reached 0.3%--which it did.

After the release, Dallas Fed President Lorie Logan also hinted that stronger inflation could warrant a faster pace of increases. Chicago Fed President Austan Goolsbee called the consumer price data "another distressing report, borderline disturbing."

With markets rapidly factoring in the possibility of more rate hikes by the Fed, the Bank of Japan will likely have to follow suit to keep the yen from weakening further, analysts say.

A summary of opinions from the BOJ's latest meeting showed that policymakers remain alert to upside inflation risks and back further rate increases.

Still, markets have repriced Fed rate bets rapidly in either direction, and the latest pivot toward a potentially bigger-than-usual move by the central bank could quickly fade.

To Daiichi Life Research Institute economist Seiji Katsurahata, speculation about a 50-basis-point Fed hike in December looks overdone.

As market pricing eventually settles on a 25-basis-point increase, short-term Treasury yields should normalize and the dollar is likely to face capped upside, he said.

U.S. Treasury yields jumped overnight after the CPI data, spilling over into the Japanese government bond market on Wednesday. The yield on benchmark 10-year JGBs rose as high as 2.785%.

Write to Megumi Fujikawa at megumi.fujikawa@wsj.com

(END) Dow Jones Newswires

November 11, 2026 00:06 ET (05:06 GMT)