Japanese Yen: Trade pressure tempered by intervention risk – MUFG

USD/JPY is trading just above 158.00. MUFG’s Lee Hardman highlights a narrow range for the Japanese Yen (JPY) against the US Dollar (USD), as intervention risk and a weaker US currency limit the pair’s upside. With Bank of Japan (BoJ) officials assessing underlying inflation as close to target, markets are pricing in a December rate hike. Higher domestic yields are supporting demand for JGBs. However, a wider trade deficit driven by higher Oil prices continues to weigh on the Yen’s performance.

USD/JPY: Narrow Range Amid Trade Headwinds

"The yen has continued to trade in narrow range against the US dollar at just above the 158.00-level."

"The heightened risk of further intervention to support the yen is helping to prevent USD/JPY from moving higher in the near-term alongside the recent correction lower for the US dollar more broadly."

"There was no clear signal that the BoJ is considering raising rates again as soon as this month which is consistent with our view that the next hike will be delivered in December."

"Bloomberg reported evidence yesterday that rising yields in Japan are helping to attract more domestic demand for government bonds."

"The wider trade deficit for Japan due to the negative terms of trade shock from higher energy prices remains a headwind for yen performance."

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