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Yen trades near 1986 levels as markets price limited BoJ tightening

Scotiabank says a hawkish BoJ hold next week could surprise and strengthen USD/JPY, which is near levels last seen in 1986.

Reported · Written up by our desk · Major Pairs

Scotiabank strategists Shaun Osborne and Eric Theoret said the Japanese yen is slightly firmer versus the US dollar, but it is still lagging most other G10 currencies. They noted USD/JPY is trading near levels last seen in 1986, leaving relatively limited resistance overhead.

The team said markets currently price little Bank of Japan tightening for the July and September meetings. They added that a hawkish hold next week could prove a meaningful surprise, potentially driving yen strength after recent warnings tied to Ministry of Finance intervention.

Scotiabank also pointed to the pricing assumptions for the BoJ events, saying investors are placing limited weight on the July 31 meeting and about 10 bps for the September 18 meeting. The strategists argued that a more hawkish stance than priced could lead to fundamentally driven moves in USD/JPY.

In the meantime, FXStreet’s broader market notes highlighted other dollar-linked moves, including commentary on GBP/USD and EUR/USD, while the yen setup remains centered on expectations for the BoJ next week.

Latest closeEUR/USD 1.138 ▼0.2%|USD/JPY 163.84 ▲0.4%|GBP/USD 1.331 ▼0.5%

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