Yen firms near 159 per dollar as oil falls

The Japanese yen appreciated to around 159 per dollar on Wednesday, snapping a two-day decline as oil prices fell further on hopes of renewed diplomatic efforts in the Middle East, easing concerns over higher inflation in the near term.

The yen also benefited from dollar weakness as markets prepared for a key US inflation reading and Federal Reserve Chair Kevin Warsh’s speech later this week.

Domestically, former Bank of Japan board member Seiji Adachi said the central bank will likely raise rates next month and again as early as January, warning that holding rates could reignite a yen selloff and accelerate import-driven inflation.

Markets are currently pricing in around an 80% probability that the BOJ will raise rates by 25 basis points to 1.25% next month, up sharply from about 23% before the central bank’s July meeting.

Meanwhile, BOJ Governor Kazuo Ueda will not attend the Fed’s annual Jackson Hole symposium this week due to a scheduling conflict.