Yen Fails to Rally Despite BoJ Hike to 1.25%, Carry Trade Persists

The Bank of Japan raised its policy rate to 1.25%, yet the yen failed to sustain appreciation against the dollar, defying conventional interest rate logic. This highlights the enduring strength of US rates and the persistence of the yen carry trade, raising risks of a sudden unwinding. The development underscores market skepticism about the BoJ's normalization path and potential for volatility in FX and global risk assets.