S&P 500's historical September softness stretch looms

Scotiabank strategists Shaun Osborne and Eric Theoret have observed the USD/JPY trading within a relatively flat range between 158.00 and the mid-159s. The Japanese Yen (JPY) has been underperforming most G10 currencies. Reports indicate that major banks are shifting the Bank of Japan (BoJ) tightening calls to September, leading to an increase in pricing by around 20 basis points.

Even though the yen has declined by a minuscule 0.1% against the USD, it is still underperforming all of the G10 currencies with the exception of NOK. Although fundamental releases have been limited, media reports indicate that high-profile adjustments to BoJ forecasts are causing major banks to adjust their tightening calls to September.

The BoJ meeting is still priced at 20 basis points, leaving some room for further near-term upside. Market participants are more concerned about the central bank's tone as they look beyond the September 18 meeting. For USD/JPY, the recent flat trading range is roughly bound between 158.00 and the mid-159s.