Weak yen and strong dollar shake Asia

U.S. policymakers pushed back against the idea of a quick shift toward easier monetary policy. Rate futures now imply a much more cautious path, and U.S. Treasury yields have started to edge higher again. Against that backdrop, the dollar index has added around 0.5% and is trading close to its monthly highs.

The yen, meanwhile, has weakened to roughly 157.2 per dollar, revisiting levels last seen in January. The move lower accelerated after the new leadership in Tokyo signaled it was not ready to launch immediate, aggressive measures, limiting itself to verbal warnings about “excessive volatility” in the currency market.

Investors are increasingly testing the patience of Japan’s Ministry of Finance. Analysts say full‑scale interventions similar to those seen in 2022–2024 become more likely if the dollar moves toward the 160 area and the yen’s slide turns disorderly. For now, markets are betting that the Bank of Japan will move carefully, even if it does opt for a modest rate hike in December after years of ultra‑loose policy.

A weak yen traditionally supports the Japanese stock market: exporters benefit from a more favorable exchange rate, and foreign investors find it easier to build positions in local equities. Nikkei futures rose in early Asian trade, reflecting stronger risk appetite after upbeat Nvidia results and a rebound in global tech names.

Asian equity indexes as a whole are tracking a mix of dollar strength and local drivers. Regional benchmarks for Asia ex‑Japan shares are inching higher after a recent sell‑off fueled by worries about an overheated tech sector. Chinese and Hong Kong markets look more cautious on the back of soft data and lingering concerns around real estate, while Japanese stocks are benefiting from steady inflows of long‑term foreign capital.

In the end, Asian currency and equity markets are meeting at the same crossroads: investors are watching the balance of risks between the Fed’s more hawkish tone and the Bank of Japan’s careful moves. The longer Washington keeps rates elevated, the stronger the dollar is likely to remain and the more painful the backdrop may become for the yen and other regional currencies that depend on foreign capital flows.