Bitcoin could see increased volatility as traders assess how upcoming Federal Reserve and Bank of Japan decisions may change the interest-rate gap, influence the yen and affect carry trades.
Investors are preparing for two major monetary-policy announcements scheduled just days apart, beginning with the Federal Reserve’s decision Wednesday afternoon. Futures markets were assigning more than an 80% chance to a 25-basis-point rate increase. The tight timing of the meetings has shifted attention toward whether monetary-policy expectations in the U.S. and Japan are beginning to move closer together.
Expectations for a Fed hike have changed dramatically since late August. The probability moved from around 50% to as high as 92%. That adjustment came as the yen posted a monthly gain against the dollar, according to the report, creating an important backdrop ahead of the Fed decision and the BOJ meeting two days later.
The market focus extends beyond the individual decisions. If both central banks raise rates, the interest-rate differential between Washington and Tokyo would shrink for the first time in several years. Investors are assessing what that could mean for yen-funded carry trades and overall appetite for risk as the fourth quarter begins.
The two meetings also come amid a potentially broader shift in global monetary policy. The Federal Reserve, European Central Bank and BOJ could all raise rates within the same period for the first time since 2006. The possibility highlights a broader discussion about whether interest-rate policies among major economies are starting to converge.
For Bitcoin and other risk assets, the main concern is the uncertainty surrounding future policy directions rather than a particular price target. Traders are watching the U.S.-Japan rate differential, the yen’s reaction and potential changes in carry-trade positioning as the two decisions approach.
How Two Central Bank Decisions Within 48 Hours Could Affect Bitcoin
The Federal Open Market Committee’s September 15-16 meeting includes a new Summary of Economic Projections, according to the Fed’s meeting calendar. Investors will examine the central bank’s dot plot and any dissenting BOJ votes for clues about how quickly monetary policy in the U.S. and Japan could converge.
Expectations for the BOJ are comparatively firm. A CNBC survey of 18 economists conducted between September 9 and 14 found that 89% anticipated a 25-basis-point increase to 1.25%, which the report described as a new three-decade high. Economists cited stronger inflation, rising wages and pressure from Washington as reasons for expecting a hike.
There is less agreement over the pace of future tightening. Jesper Koll, expert director at Monex Group, forecast a 50-basis-point increase, while Carlos Casanova, senior economist for Asia at Union Bancaire Privée, expected the BOJ to keep rates unchanged, arguing that the available data did not yet warrant a faster tightening cycle.
The first key event will be Wednesday’s Fed announcement and updated dot plot. Futures pricing will then provide an immediate indication of how traders have adjusted their expectations for U.S. interest rates and whether they see the gap with Japan narrowing.
The BOJ decision arrives Friday, with investors expected to pay close attention to any dissenting votes. Political considerations could also affect the outlook. Takahide Kiuchi, executive economist at Nomura Research Institute, told CNBC that the Trump administration had effectively limited the ability of a potential Takaichi administration to prevent the BOJ from raising rates.
The yen will provide another important market signal. About 61% of economists surveyed by CNBC expected the currency to trade between 155 and 160 per dollar during the following month.
The yen’s movement and any shifts in carry trades could offer clues about whether the expected period of simultaneous tightening is taking shape and what that changing environment could mean for Bitcoin and other risk-sensitive markets.
