Japanese Yen Falters Ahead of Fed and BoJ Rate Decisions
The Japanese Yen is experiencing moderate losses against the US Dollar on Monday, but remains close to seven-month highs. The USD/JPY pair trades above 153.50 after bouncing from last week's lows at 152.90, yet still below the previous support area around 155.20.
Analysts at ING believe that a hike in interest rates by the Federal Reserve (Fed) on Wednesday would bolster credibility and take steam out of the debasement trade. They argue that some modestly higher rates at the very short-end of the US curve won't hurt the dollar, but rather help underpin it.
Strategists at OCBC highlight that markets are largely positioned for a 25bp hike by the Bank of Japan (BoJ) on Friday, which has flipped speculative positioning net long JPY for the first time since February. They caution that further downside in USD/JPY may require the BoJ to sound sufficiently hawkish and US yields to turn lower.