BoJ's Hawkish Tone Fails to Stimulate JPY
TD Securities analyst Alex Loo notes that despite Bank of Japan Governor Ueda's hawkish tone, the Japanese Yen did not react strongly to the central bank's decision to keep its policy rate at 1%. The bank expects a 25 bps hike only in December 2026 and forecasts USD/JPY trading within a broad range of 158-163 in coming weeks.
The analysts warn that if USD/JPY moves above 162, intervention risks increase. They also mention that OIS markets are close to fully pricing an October hike, leaving little room for the BoJ to stimulate the JPY stronger.
Loo points out that verbal jawboning is no longer effective in influencing JPY price action and that more forceful actions would be needed to curb the prevailing bearish JPY bias. He suggests that the MoF may step in again post-BoJ if USD/JPY reverts to above 162 level.
The analysts believe that the USD may stay supported from hawkish FOMC dissents, limiting any USD sell-off absent a material slump in US data. They expect USD/JPY to trade within a 5 big figure range of 158-163 in the coming weeks.