Japanese Yen: Shifting rate expectations and currency support – Commerzbank
Commerzbank’s Volkmar Baur notes that Japanese government support for an imminent Bank of Japan rate hike has reinforced market expectations rather than surprised them. Probabilities now favor a hike as early as September, with October fully priced and another move in December possible.
Commerzbank's Volkmar Baur points out that Japanese government backing for an impending Bank of Japan rate increase has solidified market expectations, rather than surprising them. Now, there is a 75% probability of a rate hike in September, while October is already fully priced in and December may see another move. These changing rate expectations, combined with intervention risks, are contributing to the stabilization of the Japanese Yen.
The news that the Japanese government expressed support for an imminent interest rate hike by the Bank of Japan was not a shock, as the market had already been pricing it in over recent days. This news did not cause the JPY to appreciate more significantly because the fear of further intervention has been preventing the market from weakening the currency even more. As expectations shift and stabilize, the currency is gradually being supported.
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