Rabobank are looking for further USD strength in the near term and the Bank of Japan to tweak policy a little further out:
- “Given the potential issues involved with maintaining its yield curve policy at current settings and the risk that JPY weakness would accentuate any further strength in oil prices, we see another tweak to policy as likely being on the cards in the months ahead,”
Adding on reports that the BOJ will discuss raising their inflation forecasts for FY23/24 at the October 31 policy meeting:
- “The market will likely infer from this that the chances of further normalisation in BoJ monetary policy may be increased in the coming months
- Allowing JGB yields to push higher should remove some downside pressure on the value of the JPY.”
And:
- “While we expect that USD strength will dominate in the coming months, a policy tweak from the BoJ would likely reinforce psychological resistance in the USD/JPY150. Our forecast of a move back to USD/JPY 148 on a 1-to-3-month view, assumes further policy normalisation by the BoJ”
If I was Bank of Japan Governor Ueda I’d be keen to see USD/JPY above 150 and get everyone good and long, then I’d tweak policy and crush it. Just ’cause. 😉
This article was written by Eamonn Sheridan at www.forexlive.com. Source