Japanese Yen: Could BoJ caution deepen losses against US Dollar? – MUFG

Renewed weakness in the Japanese Yen leaves USD/JPY exposed to further upside as markets await BoJ Governor Ueda’s comments, according to MUFG’s Halpenny. Despite Finance Minister Katayama’s threat of “bold action” if required, MUFG sees intervention as unlikely before the 160 level is reached. The bank expects cautious communication from the BoJ to maintain near-term pressure on the Yen.

Can the Yen Recover With Intervention Still Seen as Distant?

"The yen has now also renewed its downward momentum despite further comments today from Finance Minister Katayama threatening “bold action” in the FX market if needed."

"We are likely still some distance from that with the 160-level the obvious point in which those threats could turn into action."

"The yen may well struggle through this week with investors likely anticipating BoJ Governor Ueda being more cautious in his words on Friday given the global backdrop."

"The BoJ will be mindful of that and while we expect the BoJ to signal more rate hikes are necessary, Ueda’s style of communication suggests he may not provide a strong message on a move in December that remains 80% priced."

"That could mean USD/JPY retraces further higher this week, especially if investor sentiment related to AI stabilises."

"We have had a glimpse of how the yen may perform if there was a major AI-related correction in global equity markets when the yen showed traits of its previous safe-haven status following the recent AI sell-off."

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