Dollar Weakness Lifts Bitcoin and Gold in Tandem, Triggered by Pressure for a Japanese Rate Hike
Bitcoin held support at $80,000 and briefly climbed to $81,000, staying above the 110 million won level in won terms. Gold futures surpassed $4,500 per ounce, rebounding more than 10% over the past month. Expectations that the pace of rate increases would slow, along with expectations of expanded liquidity from a weaker dollar index, drove the joint strength in crypto and gold.
The actual trigger for this move was the Japanese yen. The Japanese government has maintained a fiscal expansion stance while remaining reluctant to raise rates, leading to continued yen weakness and pressure to intervene in currency markets by selling U.S. Treasuries to defend the yen. However, the U.S. shifted from its previous tacit cooperation and began pressing Japan to raise rates, tilting sentiment within the Bank of Japan toward a hike, with the probability of a rate increase at the September 18 BOJ decision effectively rising to 100%.
A Japanese rate hike would increase the appeal of Japanese government bonds, strengthening the yen, which in relative terms means dollar weakness. Dollar weakness in turn drives demand for alternative stores of value like gold and bitcoin — this chain reaction was presented as the key mechanism explaining the day's joint strength in both assets.