Yen Hits 40-Year Low; Crypto Markets on Alert as BOJ Signals Tightening

The yen is approaching a 40-year low against the dollar, making the Bank of Japan's (BOJ) interest rate decision a key variable for cryptocurrency markets. While markets have accepted rate freeze as a given, the focus remains on potential future tightening signals' impact on carry trade and global liquidity. As of 28th (local time), the dollar-yen exchange rate neared 164 yen, close to last week's 40-year high. Markets are closely watching the BOJ's policy meetings on 31st and August 1st, where a 1.0% interest rate remains at its highest since 1995. However, the likelihood of rate freeze is now 98% according to market probabilities, with polls forecasting 99% chance of maintaining rates. While immediate outcomes are less critical, attention is on long-term policy direction. The BOJ acknowledged rising inflationary pressures due to wage and price hikes, suggesting continued rate hikes and adjustments to monetary easing. Despite ongoing yen weakness, the BOJ's stance on carry trade and liquidity risks remains pivotal for crypto markets.