Japanese Yen: BoJ caution risks further losses against US Dollar – MUFG

Halpenny at MUFG notes renewed Japanese Yen weakness, with USD/JPY seen vulnerable to further gains as markets await comments from BoJ Governor Ueda. While Finance Minister Katayama threatens “bold action” if needed, MUFG judges intervention is unlikely before the 160 level and expects cautious BoJ communication to keep the Yen under pressure in the near term.

Yen soft as intervention seen distant

"The yen has now also renewed its downward momentum despite further comments today from Finance Minister Katayama threatening “bold action” in the FX market if needed."

"We are likely still some distance from that with the 160-level the obvious point in which those threats could turn into action."

"The yen may well struggle through this week with investors likely anticipating BoJ Governor Ueda being more cautious in his words on Friday given the global backdrop."

"The BoJ will be mindful of that and while we expect the BoJ to signal more rate hikes are necessary, Ueda’s style of communication suggests he may not provide a strong message on a move in December that remains 80% priced."

"That could mean USD/JPY retraces further higher this week, especially if investor sentiment related to AI stabilises."

"We have had a glimpse of how the yen may perform if there was a major AI-related correction in global equity markets when the yen showed traits of its previous safe-haven status following the recent AI sell-off."

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