USD/JPY has been seesawing in a narrow range in the 151.000s over the last two weeks as threat of intervention from the Japanese authorities keeps bulls timid whilst stronger-than-expected US data keeps bears in check.
USD/JPY’s next move depends on the actions of the Fed, according to a BofA strategist. If the Fed cuts the USD/JPY could fall to 142; if not it could rally higher. Intervention is like “leaning against the wind” if the Fed decides not to cut, the market will press higher.
BoJ out of the Picture The Bank of Japan on the other hand is unlikely to play a key role and Vamvakidis suggests it is unlikely the BoJ will rush to raise interest rates to combat rising inflation. Japan has the opposite economic problem to most of the rest of the world. “Japan is a completely different case – inflation there is a solution, not a problem. They are happy to see persistent inflation. It is above the target but not by much. And they have a long history of 30 years deflation.
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