USDJPY Daily
Mitsubishi UFJ Financial Group highlights that the Bank of Japan continues to signal a potential rate hike despite the recent strength of the yen, as higher yields are expected to limit appetite for selling the yen.
Key points:
- Bank of Japan’s position: The Bank of Japan did not change its monetary policy outlook despite recent market volatility and a sharp drop in the USD/JPY pair. Deputy Governor Himeno stressed that further interest rate hikes are needed if economic conditions are in line with the BOJ’s outlook.
- Market reactions: The recent decline in USD/JPY has not significantly changed the Bank of Japan’s message. The yield on the 2-year Japanese government bond is still below its highs from earlier this year, suggesting that yields could rise further.
- Interest rate hike expectations: With only 15 basis points of rate hikes priced in by March next year, MUFG sees that as too low. The soft landing of the U.S. economy could support one or two rate hikes by the Bank of Japan, which could limit yen selling.
conclusion:
Mitsubishi UFJ Group believes the Bank of Japan is likely to maintain its rate-hike path despite the recent yen strength, as higher yields are expected to limit further yen depreciation. The BOJ’s current communications are likely to reinforce this stance, while maintaining a cautious but forward-looking approach to monetary policy.
For banking business ideas, Check out eFX PlusFor a limited time, get a 7-day free trial, Basic for $79/month, and Premium for $109/month. Get it here.
Comments are closed, but trackbacks and pingbacks are open.