(Bloomberg) -- Currency strategists have had a radical rethink on the trajectory of the yen in the wake of the Bank of Japan’s interest rate hike in July and...
-- Currency strategists have had a radical rethink on the trajectory of the yen in the wake of the Bank of Japan ’s interest rate hike in July and the Federal Reserve’s recent signaling of looming cuts to US borrowing costs.Turkey Plans Istanbul Taxi Surge to Tackle Complaints
Federal Reserve Chair Jerome Powell said in Jackson Hole last month that “the time has come” to cut rates while the BOJ suggested in a pair of research papers that more rate hikes are possible, and Governor Kazuo Ueda did the same during comments in parliament. For prognosticators of the yen’s future moves, US economic data and the Fed’s monetary policy remain key. After Powell’s speech at the Jackson Hole conference, the yen advanced amid a broad dollar selloff to 143.45, its strongest level since a dramatic spike on Aug. 5. Swaps traders are betting the Fed will cut rates by at least 25 basis points in September, with a 1-in-4 chance of an even bigger 50 basis-point move.
Although Ueda hasn’t said that rate hikes are imminent, he emphasized in parliament that the BOJ still plans to hike rates if the economy and prices stay in line with forecasts. Standard Chartered said the governor’s comments strengthen expectations for further monetary tightening after a leadership vote for Japan’s ruling party on Sept. 27, which will determine who becomes the next prime minister.
Carol Kong, a currency strategist at Commonwealth Bank of Australia, said she hasn’t changed her forecasts for 145 per dollar at the end of this year, though she sees it appreciating to 139 at the end of 2025.“We don’t think that just because the Fed cuts rates that the yen will become strong, as this isn’t the pattern for some of the past cutting cycles,” said Shusuke Yamada, head of Japan currency and rates strategy at BofA Securities Japan in Tokyo.
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