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MENAFN- Daily Forex)
Recently, the Japanese yen came under renewed pressure following the Bank of Japan's (BoJ) latest policy decision, as the bank failed to meet market expectations of reducing bond purchases. In forex trading, USD/JPY rose to resistance at 158.25 before settling around 157.55 at the start of trading this week. In a similar move, GBP/JPY rose to its highest level in 15 years around 201.50.
For its part, the Bank of Japan kept interest rates at 0.1% at its last policy meeting, in line with consensus expectations. However, there were expectations that the BoJ would decide to limit bond purchases at this meeting, especially since Governor Ueda hinted that this was a possibility in a speech he gave last week. In this case, there were no changes to the bond purchases, which again confused the market and exposed the Japanese yen to another round of violent selling. However, the Bank of Japan stated that its plans to reduce purchases over the next year or two will be presented at the policy meeting in July.
Commenting on the performance of reliable trading platforms, Christopher Wong, FX analyst at OCBC, said, "The yen is suffering after there was a perception that the BoJ is in no hurry to normalize policy. USD/JPY is likely to challenge its previous high of 160, and this is likely to see increased risks of intervention. But intervention, at best, is an option to slow the pace. of consumption and not a tool to reverse the trend."
He added, "For USD/JPY to retreat more decisively, it would require dollar friendliness or for the BoJ to signal an intention to normalize urgently. Neither of these seems to be happening, and the path of least resistance for USD/JPY is up."
In general, investment banks have been discussing the BoJ's tactics on interest rates and bond buying. Norihiro Yamaguchi, chief Japan economist at Oxford Economics, commented,“The BoJ was unlikely to react to the recent yen weakness by raising interest rates, as it would put them in the position of a 'dog chasing its own tail', as Alan Blinder put it. If they did react, the market would have expected them to do so. To do the same next time.”
Danske Bank, for its part, pointed to economic weakness:“Regardless of the decision, Japan is too fragile to raise interest rates now with the economy stagnating and price pressures low. Therefore, we expect the next rate hike to happen in September or October, when the economy has recovered a bit and consumers are regaining some purchasing power.” According to Kohei Okazaki, chief economist at Nomura Securities,“My first impression is that the BoJ is buying time. If Japanese government bonds are cut easily under these circumstances, there is a possibility of creating an environment where markets will be under pressure from anticipation.” The Bank of Japan has taken measures to ward off such pressures.
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USD/JPY Technical Analysis and Expectations Today
According to the performance on the daily chart, the general trend of the USD/JPY price is upward and the chance of returning to the psychological resistance level of 160.00 is strong, through which the technical indicators will move towards strong overbought levels. Consequently, there will be more talk about an imminent Japanese intervention in the Forex currency markets to prevent further collapse of the currency exchange rate, which harms the Japanese economy.
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