The BOJ’s negative rate policy clashes with the Fed’s hint of more hikes, risking widening the yield gap.
The yen remains in limbo ahead of the Bank of Japan’s policy decision on Friday, with intervention causing market jitters.
The currency appears to be caught in limbo early Thursday, with the risk of intervention offering support while the widening yield gap with the US weighs against this. Implied overnight volatility in the dollar-yen pair climbed the highest level since July 28, when the BOJ surprised the market by adjusting yield-curve control.
“The yen weakened only moderately, as despite Janet Yellen’s commentary on Tuesday, Japan’s ministry of finance is likely to intervene in large fashion at 150 per dollar because it is hard to tolerate more inflationary pressure,” said John Vail, chief global strategist at Nikko Asset Management Co. in Tokyo.
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