USD/JPY rally raises risk of year-end BoJ hike
Nov 14 (Reuters) -The probability of a rate hike by the Bank of Japan has been steadily rising since its October policy decision to leave rates on hold, which in large part has stemmed from the persistent weakness of the yen.
Overnight, USD/JPY traded above 156, hitting levels not seen since late-July.
Japanese officials have continuously flagged concerns over a weak yen and as we move towards the prior intervention level at 160 the reward for being short JPY is diminishing.
Meanwhile, with opposition lawmakers suggesting that the BoJ should raise rates to 1%, at a minimum, in order to counter the impact of a weaker currency, it is clear that the bar for a hike taking place sooner rather than later has been lowered.
In turn, the higher USD/JPY goes, the more likely the BoJ hikes next month.
The next policy meeting is due on Dec. 19. By that time the BoJ will have access to service inflation figures for the October period (due Nov 25), whereby a firmer print will likely set the stage for a hike.
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BoJ probability https://tmsnrt.rs/4euxAHB
(Justin McQueen is a Reuters market analyst. The views expressed are his own.)
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