BoJ Guidance Key to Further JPY Gains Against USD

The Japanese Yen has extended its gains against the US Dollar, pushing USD/JPY near recent lows despite firmer Federal Reserve hike pricing and higher US front-end yields.

According to OCBC strategist Christopher Wong, markets are positioned for a 25-basis-point Bank of Japan (BoJ) hike, with speculative positioning now net long JPY. Further USD/JPY downside is seen as contingent on a sufficiently hawkish BoJ message and softer Dollar and US yields.

The Yen's strength is being driven by expectations surrounding the BoJ's upcoming guidance, which will be closely watched this week. A hike is largely priced in, but the bigger focus is on Governor Ueda's guidance and whether the BoJ keeps the door open to further normalization.