Yen Surges as Traders Bet on Potential BOJ Rate Hike
The Japanese yen has been on a tear this week, rising over 2% against the US dollar and poised for its strongest week in more than a month. The sudden surge in the yen is largely attributed to growing expectations that the Bank of Japan could be more hawkish than previously expected when it meets on September 17-18. This has sparked concerns about another potential intervention by the BOJ or even joint action with the US Federal Reserve.
According to Ray Attrill, head of FX strategy at National Australia Bank, 'the market is getting a little bit more jittery about what might be forthcoming effectively, and potentially the intervention threat is still there.' He added that unless significant policy surprises occur or the Fed takes aggressive action on behalf of the yen, a sustained move below 155 in the coming weeks seems unlikely.
JPMorgan also weighed in on the situation, stating that expectations for Japanese pension funds repatriation and BOJ rate hikes 'look somewhat overdone' at the moment. However, they noted that an unwinding of estimated ¥16 trillion to ¥17 trillion ($102.36 billion to $108.76 billion) in yen shorts could send the dollar to a 142-146 range against the Japanese currency.