BoJ Hike Risk Sends USD/JPY Testing 160.00 Resistance
Japan's economy is on high alert as hawkish comments from the Bank of Japan (BoJ) have raised the possibility of a significant interest rate hike. According to Brown Brothers Harriman, Takata Hajime left the door open for a 50-75 bps move and back-to-back hikes at the next meeting.
In an interview, Takata emphasized the need 'to pay greater attention than before to upside risks' to inflation. This has sparked concerns that a jumbo BoJ hike is a real possibility, which could ultimately cap long-end yields and support the Japanese Yen (JPY).
The swaps curve currently price in just 5% odds of a 50bps hike on September 18, but market analysts believe a forceful move by the BoJ could anchor inflation expectations and boost JPY. As a result, USD/JPY is testing psychological resistance at 160.00.