USD/JPY 148 cap? BOJ more hawkish than thought
Aug 8 (Reuters) -There is reason to believe USD/JPY may be capped at 148.00 going forward. A more hawkish-than-thought Bank of Japan, narrower Japan-U.S. interest rate differentials and Japanese exporter and investor foreign currency sales should see the yen continue its ascent.
BOJ July 30-31 minutes suggest the Policy Board was more hawkish than thought and will remain so as tipped by Governor Kazuo Ueda nL4N3JN0PG despite dovish comments from Deputy Governor Shinichi Uchida Wednesday nL1N3JU03L, and perhaps even hike again before the year is out.
Markets will no doubt settle eventually, whichshould stay any reservations BOJ policymakers haveon hiking again for fear of disturbing markets.
Recent stock market plunges, especially Monday'slargest everone-day fall for the Nikkei, were definitelya nightmare for BOJ policymakers and the government. Yetthis was not just the BOJ's fault, but also due toheavy speculation in equity markets worldwide with stocks plunging globally.
USD/JPY plunged on July 31 after the BOJ hike from 153.95 to 141.68 on August 8. It rebounded to 147.93 Wednesday after Uchida's comments but has since come off.
Japan-U.S. interest rate differentials are likely to narrow more and this should help cap USD/JPY. The Japanese government bond-U.S. Treasury two-year interest rate differential is around 365 basis points, down large from around 475 bps in May, and looks to move lower still.
Japanese exporters and investors are likely to be more aggressive in repatriating overseas earnings on USD and other currency rallies too. Big manufacturers have budgeted 142.68 for the current fiscal term and all firms 144.77 for USD and 155.40 for EUR nAZN1WA9FV.
Related comments nL1N3JS022, nL1N3JO02M, nL1N3JA02A.
For more click on FXBUZ
USD/JPY: https://tmsnrt.rs/3SELChM
JGB-US Treasury 2-year interest rate differential: https://tmsnrt.rs/3LWXkAD
(Haruya Ida is a Reuters market analyst. The views expressed are his own)
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