Japanese Yen: Multi-decade lows against US Dollar face BoJ risk – Scotiabank

Scotiabank strategists Shaun Osborne and Eric Theoret note the Japanese Yen (JPY) is slightly firmer versus the US Dollar (USD) but still underperforming most G10 currencies. USD/JPY trades near levels last seen in 1986, with limited resistance overhead. Markets price little Bank of Japan (BoJ) tightening for July and September, so a hawkish hold next week could surprise and trigger Yen strength after recent Ministry of Finance (MoF) intervention warnings.

Yen stabilizes before key BoJ decision

"The yen is showings signs of short-term stabilization just above Thursday’s fresh multi-decade low, buoyed by the softness in the broader USD with little attributable to ongoing official commentary from the MoF."

"Finance Minister Katayama continues to speak of ‘bold action’, threatening intervention however the market appears to have offered no meaningful reaction in the currency. "

"Fundamental risk lies with the BoJ next week, where policymakers have recently offered their own attempt at support with talk of a faster than expected tightening path."

"Markets are currently pricing little for the July 31 meeting and only 10bpts for September 18. A hawkish hold next week could deliver an important surprise and fundamentally-driven yen strength."

"For now, in USD/JPY, we see little in terms of resistance as the cross hits fresh multi-decade highs at levels last seen in 1986."

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