Japanese Yen: Focus on strength and BoJ path – MUFG
MUFG’s Michael Wan highlights ongoing strength in the Japanese Yen, with recent USD/JPY volatility seeing the pair drop toward 152.88 before stabilizing near 153.26.
Japanese Yen shows strength and Bank of Japan's path remains under focus according to MUFG's Michael Wan. Recent USD/JPY volatility saw the currency pair dip to 152.88 before resuming near 153.26. Despite mixed Japanese economic data, including stronger labor earnings and softer GDP, there is no shift in expectations for a 25 basis point Bank of Japan rate hike in September.
The focus is on Bank of Japan's communication and Yen-supportive policy signals. The article highlights volatility in USD/JPY, with the pair fluctuating between 152.88 and 153.26. US Treasury Secretary Scott Bessent challenges the market to counter his efforts to strengthen the Yen. Historically, sharp moves in USD/JPY of 10% or more are not uncommon, but this time, the moves are more likely driven by domestic factors in Japan.
EM currencies and carry trades remain resilient, but the risk remains to watch. AUD/USD is consolidating above 0.7200 amid Chinese CPI and PPI data, with RBA rate-hike expectations boosting the Aussie. Traders await US inflation figures for further impetus. USD/JPY faces fresh selling pressure following a strong Reuters Tankan business survey, indicating the need for continued BoJ policy normalization and a boost to the Japanese Yen.
Gold recovers slightly, reaching $4,400, while the US Dollar remains depressed near its lowest level in over two weeks due to the Bank of Japan's influence. Meanwhile, US diesel crack spread reaches a record high, indicating a growing divergence between diesel and WTI.
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