The USD/JPY exchange rate surged following the Bank of Japan's (BoJ) decision to maintain its policy rate. The rise is attributed to both the BoJ's cautious stance, with Governor Ueda emphasizing the need for more wage data, and the expectation of a slower pace of rate cuts from the Federal Reserve (Fed). Despite the BoJ's hesitation, the possibility of a rate hike at the next meeting in January remains. Meanwhile, Japanese authorities have warned of taking action against excessive currency movements.
USD/JPY rose sharply after BoJ kept policy rate on hold yesterday. USD/JPY ’s rise can also be attributed to the rise in UST yields as Fed guided for slower pace of rate cuts. The pair was last seen at 156.71. Back to BoJ, Governor Ueda’s remarks seem more cautious and appear to be ‘buying time’. He said that the ‘lack of wage info’ was one reason why policymakers held rates. He did say that ‘certain degree of info expected on wages by next meeting’, OCBC’s FX analysts Christopher Wong notes.
Chance of hike at the next MPC is probably still live. But for now, the reluctance of BOJ and the guidance for Fed pause suggests that USD/JPY may continue to face intermittent upward pressure.”“This morning, in response to the sharp 300pips fall in JPY against USD, Finance Minister Kato said authorities will take appropriate action if there are excessive moves in currency markets. Currency Chief Mimura also spoke about taking appropriate response if excessive FX moves.
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