Japanese Yen: Volatility focus after BoJ – MUFG

MUFG’s Michael Wan highlights that USD/JPY remains in focus after the Bank of Japan raised rates by 25bps to 1.25%, with markets interpreting the meeting as relatively dovish. He notes USD/JPY climbed from the 156 handle to above 158 before retreating below 157 following reported Bank of Japan (BoJ) rate checks, and flags ongoing intervention risk monitoring.

BoJ hike, dovish tone, intervention risk

"The key focus of markets continues to be on USD/JPY post the Bank of Japan policy meeting, coupled with reported signs by news outlets that BoJ conducted a rate check during New York session perhaps indicating some discomfort on USD/JPY moving sharply higher."

"In particular, while the Bank of Japan hiked rates by 25bps to 1.25% in its policy meeting and as such also increasing the pace of rate hikes, markets took the meeting to be somewhat more dovish for a few reasons."

"In markets, what’s important is not just the actual decision but how markets were priced heading into it."

"We as such saw USD/JPY move higher from 156 handle up to as high as above 158 after the BoJ meeting."

"What’s also interesting are news reports that the Bank of Japan seems to have conducted a rate check during the New York session, and ahead of the 3-day holiday period where liquidity for USD/JPY is likely to be lower."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)