BoJ Hike Expectations Fuel Japanese Yen Strength
The Japanese Yen has strengthened against the US Dollar due to expectations of a Bank of Japan (BoJ) interest rate hike. According to Scotiabank strategists Shaun Osborne and Eric Theoret, USD/JPY is trading near 155.65, with the JPY outperforming its G10 peers.
The shift in policy approach from FX intervention to a more fundamentally driven approach has led markets to price in a BoJ hike. This has resulted in elevated domestic risk ahead of Thursday's 7:30pm ET CPI release and the BoJ policy decision that is expected to follow shortly after.
Osborne and Theoret highlight that 'markets have moved quickly to price in a BoJ hike over the past few weeks, reflecting a meaningful shift in the govt/BoJ approach to official currency management as officials moved from intervention to a more fundamentally-driven approach.'