Yen rallies sharply in carry trade purge
July 24 (Reuters) -The purge in carry trades continues to benefit low yielding currencies, namely the yen and Swiss franc. USD/JPY broke below key support at the 100-day MA (155.37) on Wednesday, prompting a pick-up in downside momentum to hit a low of 153.10, which now trades at the lowest level since the beginning of May.
Growing interest in the Bank of Japan’s meeting next week has also added to the yen short squeeze with the probability of a potential rate rise drifting higher 0#BOJWATCH. As a result, this will up the ante for the upcoming Tokyo inflation figures due July 26.
Interestingly, while market pricing attaches a 62% chance of a BoJ hike at the July 31 meeting, up from 40% on Monday, more than three-quarters of economists in a Reuters poll said the central bank will forego a hike this month. In turn, it is clear that either outcome -- hike or hold -- will lead to a surprise.
With a week to go until the BoJ meeting and in light of the recent yen appreciation, headline risk will remain elevated.
For more click on FXBUZ
BoJ watch today https://tmsnrt.rs/3zY1fuo
(Justin McQueen is a Reuters market analyst. The views expressed are his own.)
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