UBS on Ueda and PBOC warning: Verbal intervention in FX needs fundamentals to back it up

UBS with some advice for Bank of Japan Governor Ueda re this:

And the PBOC re this:

UBS are blunt:

  • Bank of Japan Governor Ueda commented about perhaps being able to judge if (nominal) wage growth was sustainable at the end of the year. The fevered world of foreign exchange saw interest rate increases around the corner and boosted the yen.
  • The People’s Bank of China made a statement essentially saying “stop speculating against the renminbi” after tweaking a short-term policy rate. State-owned banks also sold US dollars. The renminbi rose.
  • Verbal intervention in currency markets needs to be backed by changing fundamentals to have a lasting impact.

Bolding is mine. The changing fundamentals will be in place if the BOJ does trim back on its easy policy, YCC is the first target in sight and Deutsche Bank expect it to end in October, with negative rates ending not too long after:

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As for USD/JPY, complacency from the BOJ would set the scene for it spike up again:

FundamentalsInterventionPBOCUBSUedaverbalWarning
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