USDJPY found some buying after last week’s sharp move lower.
USDJPY – Daily Chart
USDJPY slumped last week but has found some buyers around the 146.50 level. Data next week can drive the exchange rate’s path.
A summary of opinions (SOP) from the BOJ’s July 31 policy meeting said officials expected monetary policy to remain accommodative even after a recent interest rate rise.
Financial markets panicked last week after the BOJ unexpectedly raised interest rates, leading to a surge in the yen to a 7-month high against the dollar. That hurt investors looking to take advantage of the yen carry trade.
USDJPY has also slumped on expectations of a central bank rate cut in the US. The markets are discounting the chances at 100% for a 25 bp rate cut at the September 17-18 FOMC meeting and at 65% for a -50 bp rate cut at that meeting.
However, the impact of the hawkish BoJ SOP is expected to be short-lived after the sharp move in the currency rate. That is likely to force officials to pause the policy-tightening spell.
On Wednesday, BoJ Deputy Governor Shinichi Uchida told Reuters: “We won’t raise rates when markets are unstable”.
“As we’re seeing sharp volatility in domestic and overseas financial markets, it’s necessary to maintain current levels of monetary easing for the time being,” Uchida said in a speech to business leaders in Hakodate.
“Personally, I see more factors popping up that require us to be cautious about raising interest rates,” Uchida said at a news conference.
The sharp rise in the yen last week boosted Japan’s Nikkei index, but weakness has led to a pause. The Japanese economy’s GDP growth data will be Released Next week.
