USD/JPY: The move above 130 is likely to establish this as a floor – HSBC
03.05.2022, 08:04

USD/JPY: The move above 130 is likely to establish this as a floor – HSBC

The Bank of Japan (BoJ) announced that it will conduct unlimited fixed-rate bond-buying daily to defend its yield target. Following this dovish announcement, USD/JPY broke the closely watched 130 level, the first time in 20 years. This is likely to establish a floor on the pair for now, despite growing signs of anxiety at Japan’s MOF, in the view of economists at HSBC.

Japan’s MOF has so far resorted to verbal intervention,rather than FX intervention

“The BoJ announced that it will conduct unlimited fixed-rate purchases of 10-year JGBs at 0.25% every business day to defend the YCC target ‘unless it is highly likely that no bids will besubmitted’, instead of on an ad-hoc basis.”

“While the move above 130 in USD/JPY looked a little large relative to the shift in the US-Japan yield differentials, BoJ Governor Haruhiko Kuroda’s reassertion that a weak yen is overall positive for the economy likely played its part. However, that sentiment seemed less widely held at Japan’s Ministry of Finance (MOF). In a slight escalation in tone, a MOF official said ‘recent FX moves warrant extreme concern’ and it will act appropriately on FX if needed.

“For now, the move above 130 is likely to establish this as a floor on USD/JPY.”

 

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