Japanese Yen: Range-bound against US Dollar as intervention risk looms – BBH
Brown Brothers Harriman’s (BBH) Elias Haddad highlights that political comments from US and Japanese leaders helped push USD/JPY back below its 200-day moving average.
Brown Brothers Harriman's Elias Haddad explains that political remarks from US and Japanese officials contributed to USD/JPY falling below its 200-day moving average. Haddad considers wide US-Japan yield gaps and the cautious rate hikes by the Bank of Japan as factors supporting the USD/JPY pair, yet cautions that intervention risks and Japan's policy mix present challenges.
BBH anticipates the currency pair to trade within a narrow range of 155.00-160.00 in the near future. On Friday, USD/JPY slipped below its 200-day moving average (158.47) due to political interventions. Japan's Finance Minister Satsuki Katayama mentioned that US President Donald Trump expressed concerns over a weak yen, while Japanese Prime Minister Sanae Takaichi deemed the undervalued currency as an issue.
The significant yield gap between the Federal Reserve's interest rates (3.75%-4.00%) and the Bank of Japan's rate (1.25%) along with the BoJ's cautious tightening strategy act as support for USD/JPY. Nevertheless, the potential for official intervention to strengthen the yen and Japan's unique approach of loose fiscal policies and tight monetary policy are critical headwinds for USD/JPY. The expectation is that USD/JPY will remain within a 155.00-160.00 range in the near term.
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