BoJ Pricing Drives Yen Gains as Markets Anticipate Further Hikes

The Japanese Yen has gained strength against the US Dollar, according to MUFG's Derek Halpenny. He attributes this gain to markets pricing in more Bank of Japan hikes following recent comments from policy board members Takata and Ueda.

Halpenny notes that current BoJ pricing looks stretched, with 30bps of tightening now priced for the meeting this month. The year ahead pricing is close to 100bps.

He argues that a hike this month will only confirm a pick-up in pace from every six months to every three months, and suggests there's still scope to pick up the pace further if required before considering outsized moves.

Halpenny also highlights the growing US influence via EUR/JPY intervention and political pressure, as well as upcoming US data such as NFP and CPI. He believes weak US data would reinforce downside momentum in USD/JPY.