JPY Multi-Decade Lows Face BoJ Risk
The Japanese Yen (JPY) is facing multi-decade lows against the US Dollar (USD), according to Scotiabank strategists Shaun Osborne and Eric Theoret. They note that while the JPY is slightly firmer versus the USD, it's still underperforming most G10 currencies.
The USD/JPY trades near levels last seen in 1986, with limited resistance overhead, markets are pricing little Bank of Japan (BoJ) tightening for July and September. A hawkish hold next week could surprise and trigger Yen strength after recent Ministry of Finance (MoF) intervention warnings.
The yen has shown signs of short-term stabilization just above Thursday's fresh multi-decade low, buoyed by the softness in the broader USD with little attributable to ongoing official commentary from the MoF. However, fundamental risk lies with the BoJ next week where policymakers have recently offered their own attempt at support.
Markets are currently pricing little for the July 31 meeting and only 10 basis points for September 18. A hawkish hold next week could deliver an important surprise and fundamentally-driven yen strength.