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. Haddad sees wide US-Japan yield differentials and the Bank of Japan’s cautious tightening as supportive for USD/JPY, but warns that intervention risk and Japan’s policy mix are headwinds. BBH expects the pair to trade in a 155.00–160.00 range near term.

Yield gap vs intervention risk

"USD/JPY dropped back below its 200-day moving average (158.47) on political jawboning. Japan’s Finance Minister Satsuki Katayama said US President Donald Trump raised concerns about yen weakness and Japanese Prime Minister Sanae Takaichi called the undervalued yen an issue."

"Wide US-Japan yield gap (Fed funds rate at 3.75%-4.00% vs. BoJ at 1.25%) and the BoJ’s cautious tightening cycle keep USD/JPY supported."

"But ongoing risk of official intervention to strengthen JPY and Japan’s favorable currency mix of loose fiscal/tight monetary policy are key headwinds for USD/JPY."

"Bottom line, we expect USD/JPY to trade within a 155.00-160.00 range in the near term."

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