The latest Market Talks covering FX and Fixed Income. Published exclusively on Dow Jones Newswires throughout the day.

2137 ET - If the Bank of Japan raises its policy rate Friday as widely expected and signals a hawkish stance on further monetary tightening, it could trigger a sharp appreciation in the yen over Japan's upcoming long weekend, says Daiwa Securities analyst Eiji Kinouchi. The setup risks mirroring the posthike market turmoil of summer 2024, when a BOJ rate increase, alongside speculation over the Fed's policy path, prompted a surge in the yen and a steep selloff in Tokyo equities, he says. Central bank officials have been more cautious in their market communications since that episode. Japanese financial markets will be closed for national holidays from Monday through Wednesday. (megumi.fujikawa@wsj.com)

2129 ET - The Reserve Bank of New Zealand was non-committal at its September policy meeting about when the next interest rate hike might come but was clearly leaning toward a pause at the next meeting in October, says Matthew Galt, an economist at ANZ. Global developments since then have been suggesting it would be prudent to hike sooner rather than later, and the resilience shown in 2Q GDP data adds further pressure in that direction, he adds. ANZ continues to expect a 25-basis-point hike by the RBNZ in October. (james.glynn@wsj.com; @JamesGlynnWSJ)

2122 ET - The Fed's rate rise will likely add to pressure on the Reserve Bank of Australia to raise interest rates again, says David Bassanese, chief economist at betashares. Bassanese now expects the RBA to raise rates at its policy meeting later this month, with a 50% chance of a follow up rate rise in November. Global inflation pressures, resulting from both the Iran war and AI boom, along with domestic pressures suggests the RBA can't afford to wait until November before raising rates again, he adds. Further rate rises will add to the downward pressure on house prices, he says. (james.glynn@wsj.com; @JamesGlynnWSJ)

2121 ET - With the Federal Reserve signaling another rate hike this year via its dot plot, the Bank of Japan is likely under even stronger pressure to deliver a rate hike on Friday and provide hawkish guidance on further action, says Daiwa Securities analyst Eiji Kinouchi. However, concerns are growing over whether the Japanese economy can withstand more monetary tightening, he says. "Capital expenditure is already contracting year over year, and historical trends show that the yen typically shifts stronger as the economy enters a recessionary phase," he adds. While a stronger yen eases inflation, it could cool economic growth, primarily by weighing on exporters' profits. The dollar is last trading at 156.12 yen. (megumi.fujikawa@wsj.com)

2113 ET - The Fed hiking is positive for the dollar, but there may not be enough central bank policy divergence out there to move its value much higher, says Juan Perez at Monex USA. Other official decisionmakers are going to be acting in tandem with the Fed, he says, convinced that inflationary pressures are inescapable and necessitate higher rates, especially given the effects of the Middle East war on energy. While Fed Chair Warsh seems more inclined to "laissez-faire" approaches, he still has domestic opposition in the form of Treasury intervention to provide liquidity for bond markets, as well as a determination to intervene in FX, particularly to aid the yen, Perez reckons. The dollar is flat at 156.19 yen. (fabiana.negrinochoa@wsj.com)

2058 ET - U.S. interest rates are likely to remain elevated going into 2027, says J.P. Morgan Asset Management's Tai Hui in a note. While forecasts from Federal Open Market Committee members didn't change much at the Federal Reserve's September meeting, the updated median projection implies one more increase by the year-end, says the strategist. The Fed remaining hawkish going into 2027 could prompt investors to reassess asset valuations, particularly those of relatively expensive technology stocks that could be sensitive to interest-rate movements, he says. A catalyst to extend the equity bull market therefore looks unlikely in the foreseeable future, he says. Still, the possibility of the U.S. policy rate returning to above 5.0% remains limited, he adds. (megan.cheah@wsj.com)

2056 ET - Bitcoin edges higher in the morning Asia session as markets digest an expected rate hike by the Fed. Bitcoin has remained relatively resilient, says Cooper Duschang at Talos, holding broadly around pre-announcement levels. Exchange flows suggest that rather than a uniform risk-off response, investors seem to be actively repositioning as they parse the Fed's messaging, the analyst says. Around 2,170 BTC moved onto exchanges following the rate increase, followed shortly afterward by a sizeable withdrawal of about 1,260 BTC, he notes. The question now is whether Bitcoin's resilience and spot demand will hold as attention shifts to the prospects for further tightening. Bitcoin is up 0.3% at $76,374, according to LSEG data. (fabiana.negrinochoa@wsj.com)

2055 ET - Asian currencies are mixed in early trade, after the Federal Reserve raised rates for the first time since 2023. Fed Chair Kevin Warsh made it very clear that price stability is currently the central bank's primary focus. Warsh's focus and the Fed's unanimous decision to hike rates send a strong signal that it is serious about fighting inflation, says Commerzbank's Bernd Weidensteiner in a note. If Warsh disappointed market expectations and failed to raise rates, there would have been a risk of a severe negative reaction in the bond market, says the senior economist. The U.S. dollar is 0.2% lower at 155.99 yen and gains 0.1% to 1378.10 won, while the Australian dollar is 0.1% higher at US$0.7090, LSEG data show.(amanda.lee@wsj.com)

2052 ET - Long-term Japanese government bond yields are largely steady as recent upward momentum in crude oil prices eases, moderating inflation fears. The Bank of Japan begins its two-day policy board meeting on Thursday. The central bank is widely expected to raise its policy rate to mitigate upside risks of inflation, though some economists say such a move could discourage corporate capital expenditures at a time when the U.S.-Iran war has raised uncertainty over the economic outlook. Investors are focusing on policy-related developments and crude oil prices. The 10-year JGB yield is down half a basis point at 2.990%. The 20-year yield is 2 basis points lower at 3.835%. (kosaku.narioka@wsj.com; @kosakunarioka)

2015 ET - Japanese stocks are higher, supported by bargain-hunting, as recent rising momentum in crude oil eases. Pharmaceutical and machinery stocks are leading gains. Eisai is up 2.4% and Mitsubishi Heavy Industries is 3.2% higher. The dollar is at 155.87 yen, up from Y155.10 as of Wednesday's Tokyo stock market close, following the Fed's rate increase overnight. Investors are focusing on bond yields and crude oil prices. The Nikkei Stock Average is up 1.0% at 64548.75. (kosaku.narioka@wsj.com; @kosakunarioka)

1944 ET - Japanese stocks may be supported by bargain-hunting following their recent declines. Nikkei futures are up 0.7% at 64305 on the SGX. Investors may remain cautious ahead of the Bank of Japan's two-day policy meeting starting Thursday. The dollar is at 156.14 yen, up from Y155.10 as of Wednesday's Tokyo stock market close, following the Fed's rate increase overnight. Investors are focusing on bond yields and crude oil prices. The Nikkei Stock Average rose 0.7% to 63923.00 on Wednesday. (kosaku.narioka@wsj.com)

1621 ET - A higher federal funds rate today is the medicine that the housing market needs to recover tomorrow, Zillow's Mischa Fisher says in a note. Mortgage rates are more likely to come down next year if the market has greater confidence that inflation is getting under control, Fisher says. Unfortunately, it will still be a tough end of the year for home sales until then, she says. The recent run-up in rates is hitting an already slow housing market, where sales volume has started to decline year-over-year from an already low baseline, Fisher says.