Japanese Yen : Range holds with BoJ hike expectations – BBH
Brown Brothers Harriman’s (BBH Elias Haddad notes USD/JPY is stuck between resistance at 160.00 and support at the 200‑day moving average, as Bank of Japan (BoJ) officials maintain hawkish guidance and underlying inflation firms near the 2% target.
Brown Brothers Harriman's Elias Haddad observes that the USD/JPY exchange rate is currently trapped between the resistance level of 160.00 and the support of the 200-day moving average, which sits at 158.40. Bank of Japan (BoJ) officials are maintaining hawkish guidance, with underlying inflation increasing towards the 2% target.
Haddad anticipates a 25 basis points (bps) BoJ rate hike in September but believes a lower USD/JPY could be more influenced by a dovish Federal Reserve rather than additional BoJ tightening. Bank of Japan Deputy Governor Ryozo Himino reaffirmed the bank's hawkish stance, stating that timely rate hikes would prevent inflation spikes and future abrupt rate hikes, while emphasizing the need to focus on upside price risks.
Japan's underlying inflation has strengthened, staying near the 2% target or slightly below. The BoJ is expected to raise rates by 25bps to 1.25% during their September 18 meeting, with a 80% probability. Haddad believes that a lower USD/JPY will likely stem from a dovish Fed repricing instead of a hawkish BoJ action. The threat of FX intervention makes short selling JPY more expensive and restricts potential USD/JPY surges above 160.00.
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