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

DBS Group Research strategist Chang Wei Liang reiterates that USD/JPY has likely peaked for this cycle, with the pair retreating toward 153 as the Japanese Yen (JPY) leads G10 and Asian currencies. He links the earlier US-Japan intervention and comments from Treasury Secretary Bessent to anticipated Bank of Japan (BoJ) policy shifts, highlighting upcoming BoJ guidance as critical for any sustained Yen appreciation trend.

Yen strength tied to BoJ guidance

"We maintain our view that USD/JPY has peaked for this cycle, with the cross retreating towards 153 and JPY emerging as the strongest performing across all G10 and Asian currencies this week."

"Following the US-Japan coordinated market intervention in August, we argued that Treasury Secretary Bessent’s actions may be due to superior information arising from his communications with Japanese policymakers."

"Our belief that US intervention reflects a high likelihood of meaningful Japanese policy shifts has been validated by subsequent developments."

"BoJ’s Takata raised the possibility of back-to-back rate hikes last week, while Japan’s GPIF (Government Pension Investment Fund) has unexpectedly called for a meeting in late Aug to discuss asset allocation, which could presage a reallocation from foreign to JPY assets."

"Overnight, Bessent has openly credited the success of his JPY market intervention to asymmetric information and challenged market participants to bet against him."

“Whether a new JPY appreciation trend has begun will depend critically on the policy guidance that BoJ delivers next Friday.”

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