Japanese Yen: Policy scenarios favor stronger JPY against US Dollar – BBH
Brown Brothers Harriman’s (BBH) Elias Haddad highlights that USD/JPY briefly hit a seven‑month low near 152.89 before rebounding above 154.00, with support around 152.00 and resistance at 155.00.
Brown Brothers Harriman’s (BBH) analyst Elias Haddad notes that the Japanese Yen managed to briefly dip to a seven-month low of 152.89 against the US Dollar before recovering above 154.00. The Yen’s recent surge appears to be driven by global flows rather than changes in Japanese monetary policy. Haddad points out that support is near 152.00 while resistance lies at 155.00.
Despite no significant hawkish stance from the Bank of Japan, the Yen rallied due to potential repatriation flows from Japan’s GPIF pension fund and a possible unwinding of short JPY positions.
The sustainability of the Yen’s rally depends on upcoming Fed and BoJ decisions. Four scenarios are outlined, all favoring a stronger Yen. With the Federal Reserve likely to hold rates and the BoJ potentially raising rates by 25 or 50 basis points, the Yen could see significant gains. Japan’s July wage data showed nominal wages growing more than expected at 4.7% year-over-year, driven by strong full-time worker pay increases.
However, scheduled pay growth for full-timers slowed slightly to 2.7%. BBH suggests that a substantial 50 basis point BoJ hike next week is possible and could further support the Yen recovery as inflation expectations rise.
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