Japanese Yen: BoJ hawks raise hike risk – BBH

Brown Brothers Harriman’s (BBH) Elias Haddad observes USD/JPY testing 160.00 as hawkish Bank of Japan comments briefly supported the Japanese Yen (JPY). Haddad notes Takata’s openness to a 50–75 bps move and back-to-back hikes, with a jumbo hike seen as a real possibility that could anchor inflation expectations, cap long-end yields and ultimately support JPY, despite low market pricing.

Jumbo BoJ move on radar

"USD/JPY continue to test psychological resistance at 160.00. Hawkish Bank of Japan (BoJ) comments offered JPY brief support overnight."

"Staunch hawk Takata Hajime left the door open for a 50bps or 75bps hike on September 18 and back-to-back rate hikes. In parallel, Governor Kazuo Ueda reiterated the need “to pay greater attention than before to upside risks” to inflation."

"A jumbo BoJ hike at the next meeting is a real possibility, as inflation expectations account for most of the rise in 10-year JGB yields."

"A forceful move could ultimately cap the long end of the yield curve by anchoring inflation expectations and support JPY. The swaps curve price in just 5% odds of a 50bps hike on September 18."

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