Japanese Yen: BoJ rate check limits yen downside – MUFG
MUFG’s Lee Hardman notes that the Japanese Yen initially weakened sharply after the latest BoJ policy update, with USD/JPY briefly above 158.00 before retreating towards 157.00.
The Japanese Yen experienced a sharp decline following the Bank of Japan's latest policy update, with the USD/JPY currency pair briefly surpassing 158.00 before settling around 157.00. Reports of a potential BoJ rate check indicated that the central bank was prepared to intervene if the yen continued to weaken, effectively capping near-term Yen depreciation as USD/JPY approached 160.00.
MUFG analyst Lee Hardman noted that the yen's downturn was consistent with the BoJ's policy of rate hikes roughly every three months, despite external pressures such as rising US yields and energy prices. The yen rebounded late on Friday after news that the BoJ had conducted a rate check during the New York trading session, signaling their readiness to intervene if the yen's decline persisted.
This move should help to dampen market expectations for how much the yen would be allowed to weaken in the near-term, as USD/JPY neared the 160.00 level. The new phase in Japanese monetary policy is expected to involve a rate hike every three months, making it increasingly difficult for policymakers to prevent a weaker yen due to factors like higher energy prices and widening yield spreads.
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