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USD/JPY holds near 160 resistance as rate spreads lean toward yen

Brown Brothers Harriman says US-Japan rate spreads are already tightening toward JPY, but crude oil spikes are the main drag on sustained USD/JPY declines.

Reported · Written up by our desk · Major Pairs

Brown Brothers Harriman analyst Elias Haddad said USD/JPY has retraced about half of its post-intervention drop, with US and Japan rate spreads narrowing in favor of the Japanese yen.

Haddad pointed to Japan’s policy rate sitting near the lower end of its neutral estimate range, 1.1% to 2.5%, while characterizing Japan’s economy as operating above potential and the Fed stance as restrictive relative to a neutral rate of 3.0%.

The note also flagged crude oil price spikes as the biggest obstacle to further yen gains, arguing that FX intervention may be able to limit USD/JPY upside but is unlikely to force a sustained move lower while oil remains elevated.

BBH sees the pair running into major resistance at 160.00.

Latest closeWTI crude $82.30 ▲5.3%|USD/JPY 159.27 ▲0.5%

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