USD/JPY attempts to pick up from two-week lows near 155.00

The US Dollar is attempting to bounce up from 155.15 lows during the European session, although it remains capped below the 155.35 level so far. The Yen is outperforming its peers on Monday following comments by Bank of Japan Governor, Kazuho Ueda, that hint at an interest rate hike in the coming months.

Ueda said earlier on Monday that the Japanese central bank will consider the “pros and cons” of raising interest rates at the next monetary policy meeting, due on December 18 and 19. This is the strongest hint at a monetary tightening move this year and has sent Japanese Government Bonds (JGBs) surging, dragging the yen higher with them.

Yen intervention looming

Furthermore, Japan’s Finance Minister, Satsuki Katayama, observed in a TV interview that the erratic Yen swings witnessed recently do not respond to fundamentals. Katayama has reiterated the possibility of a currency intervention to deal with excessive volatility and speculative moves, providing additional support to the Yen.

In the US, on the contrary, recent macroeconomic data and dovish comments by Fed officials have cemented expectations of further Fed easing. Futures markets are pricing in an 85% chance of a 25 basis points cut next week, according to the CME Group’s Fedwatch Tool.

Beyond that, the White House economic advisor, Kevin Hassett, has emerged as the best positioned to replace Fed Chairman Jerome Powell. Hasett has advocated for the need for an easier monetary policy, and is expected to lower borrowing costs further next year. With most of the world’s major central banks at the end of their easing cycle, and the BoJ tightening rates gradually, the US Dollar is facing serious headwinds.