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USD/JPY rebounds after a brief dip near 152.89 amid BoJ and Fed outlook
BBH says flow driven JPY strength, including potential GPIF repatriation and short position unwind, could be reinforced if the BoJ delivers a 50 bps hike.
Brown Brothers Harriman (BBH) strategist Elias Haddad said USD/JPY briefly slid to a seven month low near 152.89 before rebounding above 154.00. The strategist flagged support around 152.00, linked to a January February double bottom, and resistance at 155.00, according to FXStreet.
BBH argued the recent yen strength appears driven more by flows than by hawkish Bank of Japan repricing, citing a modest pullback in longer term JGB yields. The note pointed to potential repatriation flows by Japan’s government pension fund, GPIF, and an unwind of speculative net short JPY positions as factors behind the move.
Haddad said the outlook for whether the USD/JPY plunge can persist hinges on upcoming Fed and BoJ rate decisions, with risks skewed toward further yen gains. BBH laid out four scenarios, including Fed hold with BoJ hikes of 25 bps or 50 bps, and Fed increases of 25 bps paired with BoJ moves, with USD/JPY expected to drop most sharply in the Fed hold, BoJ +50 bps case.
The BBH view also highlighted that a potential 50 bps BoJ hike next week cannot be ruled out, and that larger action could re anchor inflation expectations, cap the long end of the curve, and turbocharge the yen recovery. The note added that Japan’s July wage data was mixed, with total nominal wage growth rising to 4.7% year over year and scheduled pay growth for full time workers slowing to 2.7% year over year.
Latest closeUSD/JPY 158.82 ▼0.9%