JPY: BoJ surprise hike doesn't cause JPY rally – ING
|The Bank of Japan raised interest rates to 0.25% today, in line with our call but against consensus and market pricing. The BoJ also announced bond purchases will be nearly halved to around JPY 3tn by 1Q26, ING’s FX analyst Francesco Pesole notes.
JPY isn’t rallying for some reason
“The statement also stressed the inflationary risks of higher import prices, where the impact of a weak currency is greater. This surprise hike does fall into a generalized effort to stabilize the yen, in our view. USD/JPY swung after the release, and an attempted break lower was halted around the 151.6 (200-DMA support). The pair quickly bounced back and currently trades at 153.0, marginally above the pre-announcement levels.
“The lack of a post-announcement JPY rally must be associated with some lingering structural positioning in the yen, as speculators might have seen the rate hike as a near-term peak for the yen, and as an opportunity to re-enter carry-attractive trades below 152. Incidentally, consensus was probably in favor of a larger decrease in bond purchases, which have a bigger say on how far JGB yields can rise.
“Beyond the short-term, JPY looks on more solid ground, although watch for some JPY selling later today once FX intervention figures are released by the Ministry of Finance: an elevated figure could ignite speculation that the intervention strategy is unsustainable. The US events should determine the direction for USD/JPY near term, and we think that a retest of sub-152 levels remains possible.”
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.