Japanese media intensively revealed that the Central Bank of Japan is considering raising interest rates. Analysts are cautious about the yen's rebound.

Jinshi data, as of July 31st, NHK, Jiji Press, and Nikkei News reported late at night that the Central Bank of Japan is considering raising the Interest Rate by 15 basis points to 0.25% at the meeting ending on Wednesday, which exceeds the current market expectation. The market still prices in only a 55% probability of a 10 basis point hike. The yen pumped on Tuesday. The Bank of Japan will also provide detailed plans to reduce large-scale bond purchases. Shaun Osborne, Chief Forex Strategist at the Canadian Imperial Bank of Commerce, said, “Today we saw significant fluctuations in the yen.” “Some people believe that this trend may have ended, but I think some arbitrage trades and some positions may still need to be further closed.” Osborne believes that the fair value of the yen against the dollar is about 145 and that short positions in the yen may need to completely close all positions, and even a possible reversal still has a way to go. Brad Bechtel, Global Forex Head at Jefferies in New York, believes that further pumping of the yen may be temporary, as the currency is expected to continue to be affected by the large interest rate differential between the US and Japan.