BoJ Hike Risk Lifts Japanese Yen Against US Dollar

Japan's Ministry of Finance (MoF) is breathing a sigh of relief as the Japanese Yen (JPY) has gained modestly against the US Dollar (USD), reaching near 159. With USD/JPY trading in tandem with EUR, but showing relative underperformance against most G10 currencies, Scotiabank strategists Shaun Osborne and Eric Theoret see this as a reassuring sign for policymakers.

Osborne and Theoret highlight that efforts to counter Yen depreciation have been significant, with coordinated action from the Bank of Japan (BoJ) and the Federal Reserve (Fed). The BoJ is considering a possible hike in the fall, which would be a crucial development. Next week's release of Q2 GDP data will also be closely watched by policymakers.

The strategists note that policy commentary will be key in determining the near-term direction of USD/JPY. They see resistance above 159.50 and support just above 158.50.