More unwinding of JPY carry trades at the BOJ meeting – DBS
|USD/JPY plunged from 162 to 152 in the fortnight to July 25. The sell-off was triggered by the third decline in US CPI inflation fuelling bets for a Fed cut in September, suspected currency interventions from the Bank of Japan, and US Republican presidential candidate Donald Trump’s decrying of the JPY’s massive weakness, DBS senior FX strategist Philip Wee notes.
JPY carry trade continues to unwind
“Japan sees an opportunity to reverse the JPY’s weak fortunes at this week’s BOJ-FOMC meetings on July 31. The Liberal Democratic Party believes that the JPY’s multi-decade lows sank the Kishida Cabinet’s approval ratings by adding to the consumers’ cost of living crisis and hurting small and midsize companies via higher raw and energy prices.”
“Over the weekend, Japan successfully pushed for the G20 joint communique to include the commitment against excessive foreign exchange volatility. Given the potential for a dovish Fed tilt, the BOJ will need to heed the call by LDP Secretary-General Toshimitsu Motegi for an unequivocal resolve to normalize monetary policy.”
“We see the BOJ halving its monthly JGB purchases to JPY 3 trillion but markets want the BOJ to hike rates a second time this year.”
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.