Japanese Yen: Peak view holds as policy shifts loom – DBS

DBS Group Research strategist Chang Wei Liang has stated that the USD/JPY pair has likely reached its peak for the current cycle, with the currency pair currently trading near 153 as the Japanese Yen (JPY) leads among G10 and Asian currencies. Liang attributes this to anticipated Bank of Japan (BoJ) policy shifts, with the upcoming BoJ guidance being crucial for any sustained Yen appreciation trend.

Following the US-Japan coordinated market intervention in August, Liang suggested that Treasury Secretary Bessent's actions may have been influenced by superior information obtained through his communications with Japanese policymakers. This belief has been reinforced by subsequent developments, such as BoJ's Takata hinting at the possibility of consecutive rate hikes and Japan's GPIF calling for a meeting to discuss asset allocation.

Analysts point to overnight comments from Bessent, who has openly acknowledged the success of his JPY market intervention and challenged market participants to bet against him. The significance of the BoJ's policy guidance for a potential new Yen appreciation trend is emphasized by Liang, stating that it will depend critically on BoJ's guidance next Friday.