Bank of America warns that USD/JPY could reach 160 quickly, saying there is little chance the Bank of Japan will halt the rise in its communications.
The BoA note was written ahead of USD/JPY’s latest rise, through 155.00 during Wednesday’s US session.
The BoA notes that the BoJ has previously stated that a weaker yen could impact monetary policy via its impact on inflation. This was not enough to support the JPY and it probably won’t be enough again if the BoJ repeats it in its next statement. (The BoJ meets on Friday, preview here)
The BoA explains what would be required of the BoJ to strengthen the yen:
- “he should recognize that policy has been too accommodating,
- that the next increase is as imminent as in June,
- and that the terminal rate would be higher than that set by the market.
BoA then adds that such communication from the Bank is unlikely.
Analysts note that if there is no intervention with USD/JPY above 155.00:
- “The market could…quickly take USD/JPY to 160 and test (the Bank’s) resolve at that level.”
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USD/JPY broke the last in a long list of “sand lined” levels at 155.00 overnight:
I have warned (repeatedly) against building response forecasts on shifting sands:
cnbctv18-forexlive
