BoJ Guidance Looms as USD/JPY Hits Peak for Cycle
DBS Group Research strategist Chang Wei Liang reiterated that USD/JPY has likely peaked for this cycle, as the Japanese Yen (JPY) leads G10 and Asian currencies in its retreat towards 153.
The strength of the Yen is tied to upcoming Bank of Japan (BoJ) policy shifts, according to Liang. He believes that Treasury Secretary Bessent's actions may be due to superior information arising from his communications with Japanese policymakers following the US-Japan coordinated market intervention in August.
Liang's view is supported by recent developments, including BoJ's Takata raising the possibility of back-to-back rate hikes and Japan's GPIF calling for a meeting to discuss asset allocation, which could presage a reallocation from foreign to JPY assets.
Overnight, Bessent openly credited the success of his JPY market intervention to asymmetric information and challenged market participants to bet against him. Whether a new JPY appreciation trend has begun will depend critically on the policy guidance that BoJ delivers next Friday, according to Liang.