Bitcoin is trading around $64,000 this week as traders brace for back-to-back interest rate decisions from the Federal Reserve and the Bank of Japan. The Fed is widely expected to hold its target range at 3.5% to 3.75% for a fifth consecutive meeting, while the Bank of Japan is seen keeping its policy rate at 1%. But with the yen sliding past 163 per dollar — its weakest in 40 years — and odds of a surprise Fed hike creeping up, the stakes feel higher than a routine hold.
Central banks in focus
The Fed's decision lands first, with the Bank of Japan following two days later. CME FedWatch showed the probability of a July hike at 38% on July 23, up from 12% a week earlier, before easing to 34.2%. That shift came after June U.S. inflation data showed consumer prices fell 0.4% month-over-month, pulling the annual rate down from 4.2% to 3.5%. Still, Brent crude oil closed above $100 a barrel on July 23 for the first time since May, a reminder that price pressures haven't vanished.
Across the Pacific, the Bank of Japan is expected to hold at 1% on July 31. But 86% of 87 economists polled by Reuters expect a hike to 1.25% by the end of December, with 53% of those naming a month picking December and 35% picking October. Japan's Finance Minister Satsuki Katayama has already stated the government is ready to intervene in the currency market if needed.
Yen weakness and carry trade risks
The yen's slide past 163 per dollar has put the carry trade back in the spotlight. A stronger yen could trigger an unwind of those positions, and Bitcoin is often the first asset sold in such scenarios. Crypto analyst Crypto Rover warned that any hint of aggressive BoJ rate hikes or intervention could cause a massive carry trade unwind, potentially more brutal than the one seen in August 2024.
The timing isn't great for Bitcoin. After a strong run, the asset is sitting just below $64,000, a level that has acted as both support and resistance in recent weeks. A sudden yen move could knock it lower before traders have time to react.
What to watch next
The Fed's decision is due Wednesday, followed by the Bank of Japan on Friday. July U.S. inflation data lands on August 12, which will give the next read on whether the disinflation trend is holding. For now, the market is pricing in a hold — but the odds of a hike are high enough that nobody is taking a steady hand for granted.
