Yen Surges as Markets Price 30bps BoJ Tightening and Near 100bps Within 12 Months
Updated
Updated · mufgresearch.com · Sep 3
Yen Surges as Markets Price 30bps BoJ Tightening and Near 100bps Within 12 Months
3 articles · Updated · mufgresearch.com · Sep 3
Summary
JPY led G10 gains as traders lifted Bank of Japan hike bets to 30 basis points for this month after board member Hajime Takata signaled a move larger than 25 basis points was possible.
Near-100 basis points of tightening is now priced over the next year, though MUFG said that looks stretched and still expects any September increase to be capped at 25 basis points.
US pressure speculation added momentum after comments backing Japan’s steps to address yen undervaluation, while Finance Minister Katayama’s remarks reinforced expectations of a policy shift toward higher domestic bond allocations.
Weak US JOLTS and ADP data also weighed on USD/JPY, and MUFG said a soft nonfarm payrolls or CPI print could deepen the pair’s downside through narrower rate spreads and a larger carry-position unwind.