USD/JPY may be capped on BOJ, FX intervention views
Nov 19 (Reuters) -USD/JPY maybe capped for now on a likely Bank of Japan rate hike at its December meeting and renewed caution over FX intervention by Japanese authorities on the recent rally to 156.76 on November 15.
BOJ Governor Kazuo Ueda expressed caution over hikes on Monday but Tokyo still sees the bias asdistinctly hawkish, unlike many offshore players.
The BOJ rarely makes explicit statements on policy shifts, and that remains true. What can be ascertained is that the BOJ is ready to hike if its outlook on the economy and prices prove correct, which appearsto be the case.
Q3 data was definitely weak nL1N3MM00P nL4N3MM00I nL1N3MP00H nL1N3MF00E but there are indications of both prices nL1N3MK025 and growth picking up in Q4 nAZN2MN9P8.
Japanese government bond yields reflect the BOJ December hike view with the yield on two-year paper up to 0.565% Monday, the highest since Q4 2008. That on ten-year JGBs rose to 1.085% Friday and Monday, near the 1.106% high of the year on July 3 and 25.
On FX intervention, many offshore players do not see any action till USD/JPY nears the year's peak of161.96 if not higher nL1N3MP094 nL1N3MD0ZN.
The feeling in Tokyo is that the Ministry of Finance is only waiting for the most opportune time, unwilling to act while the U.S. dollar remains broadly bid, diluting the effects of any action. Such action could come in tandem with a possible BOJ hike in December should JPY remain weak then.
Like the BOJ, the government too sees an extremely weak yen as anathema given upside pressures from imported inflation and higher commodity costs. Related comments nL1N3MK07T, nL1N3ME031.
For more click on FXBUZ
USD/JPY: https://tmsnrt.rs/490S0H5
Yield on JGB 10s: https://tmsnrt.rs/3OgaUAj
BOJ keeps rates steady: https://reut.rs/3YKqnyA
Intervention alarm bell rings after yen surges: https://reut.rs/3zMgxC6
Haruya Ida is a Reuters market analyst. The views expressed are his own. Editing by Ewen Chew
Related Assets
Latest News
Disclaimer: The XM Group entities provide execution-only service and access to our Online Trading Facility, permitting a person to view and/or use the content available on or via the website, is not intended to change or expand on this, nor does it change or expand on this. Such access and use are always subject to: (i) Terms and Conditions; (ii) Risk Warnings; and (iii) Full Disclaimer. Such content is therefore provided as no more than general information. Particularly, please be aware that the contents of our Online Trading Facility are neither a solicitation, nor an offer to enter any transactions on the financial markets. Trading on any financial market involves a significant level of risk to your capital.
All material published on our Online Trading Facility is intended for educational/informational purposes only, and does not contain – nor should it be considered as containing – financial, investment tax or trading advice and recommendations; or a record of our trading prices; or an offer of, or solicitation for, a transaction in any financial instruments; or unsolicited financial promotions to you.
Any third-party content, as well as content prepared by XM, such as: opinions, news, research, analyses, prices and other information or links to third-party sites contained on this website are provided on an “as-is” basis, as general market commentary, and do not constitute investment advice. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, it would be considered as marketing communication under the relevant laws and regulations. Please ensure that you have read and understood our Notification on Non-Independent Investment. Research and Risk Warning concerning the foregoing information, which can be accessed here.
