JPY Gains Momentum as Policy-Regime Shift Backs Yen Against USD

A policy-regime shift is backing the Japanese Yen (JPY) against the US Dollar (USD), according to DBS Group Research.

The Joint US-Japan intervention in July and expectations of further Bank of Japan (BoJ) tightening have led speculators to unwind their short JPY positions, giving the currency a boost.

DBS' Philip Wee notes that 'If the EUR has a credibility advantage, the JPY has a policy-regime change advantage.'

The BoJ's move towards normalization of interest rates is gaining momentum, with even former skeptics acknowledging the case for higher rates. This is driven by political backing for structural reform and room for BOJ normalization underpinning a hawkish rate hike scenario later in September.