Japanese Yen: BoJ hike expectations support JPY against US Dollar – MUFG
MUFG’s Derek Halpenny notes the Japanese Yen is firmer versus most G10 currencies as markets increasingly price a Bank of Japan rate hike in September.
The Japanese Yen has strengthened against the US Dollar as markets anticipate a potential Bank of Japan rate hike in September, according to MUFG’s Derek Halpenny. This comes after services PPI data and hawkish remarks from ex-BoJ officials have fueled expectations of tighter monetary policy. Upcoming BoJ speeches and a potentially cautious Federal Reserve at Jackson Hole may further pressure USD/JPY.
Currently, the yen is stronger than most other G10 currencies, except for the Australian Dollar. The probability of a BoJ rate hike at the September meeting is now at an 85% implied probability, the highest since the last meeting in June. Former BoJ policy board member Seiji Adachi believes the BoJ will raise rates in both September and January.
Without a strong signal from the Federal Reserve Chair Kevin Warsh on a rate hike in September, the US Dollar could soften slightly, making USD/JPY more susceptible for decline.
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