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Yen seen unlikely to strengthen as energy and Fed dominate USD/JPY
ING expects the BoJ to hold its policy rate at 1.00% on 31 July, with USD/JPY guided more by energy prices and the Fed’s reaction than by BoJ signaling.
ING’s Chris Turner and Padhraic Garvey said the Bank of Japan is expected to keep its policy rate at 1.00% on 31 July, after last month’s 25 basis point hike.
They argued that a modestly hawkish shift from the BoJ is unlikely to materially lift the yen or change the USD/JPY path, pointing instead to energy prices and the Federal Reserve’s reaction function as the main drivers.
The analysts said the upcoming Federal Open Market Committee meeting will be a key influence on near term USD/JPY moves, and they expect the pair to remain supported around 163 to 164 into the BoJ decision unless the Fed turns surprisingly dovish or Brent drops sharply toward 70 dollars per barrel.
They also flagged an outside risk of USD/JPY pushing toward 165 if Governor Ueda is judged insufficiently hawkish, while noting the risk of yen support via FX intervention. ING cited BoJ spending of about 70 billion dollars in late April and early May and remaining FX reserves of 1.09 trillion dollars.
Latest closeBrent $85.92 ▼2.8%|USD/JPY 163.85 ▲0.1%