Japanese Yen gains momentum as BOJ Governor Ueda's comments amplify market expectations for an imminent policy shift, driving significant movements in currency and bond markets amid rising rate hike probabilities.
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- Current Price: ¥157.426.78 (-0.3%)
- Rate Hike Probability: 74% (January), 89% (March)
- JGB 2-Year Yield: 0.7% (Highest since 2008)
BOJ Policy Outlook
Governor Kazuo Ueda's latest remarks have intensified speculation about a potential rate hike at next week's meeting (January 23-24). The governor highlighted encouraging wage discussions from new year events and recent branch managers' meetings, marking a notable shift in communication strategy. These comments follow Deputy Governor Himino's similar forward-looking statements, suggesting increased policy coordination.
Overnight index swaps now show a 74% probability of a rate hike this month, up from 60% earlier in the day, reflecting growing market conviction. Source: Bloomberg Financial LP
Yield Dynamics
Japanese government bonds faced selling pressure, with the 2-year yield reaching its highest level since 2008 at 0.7%, while the 30-year yield touched a new peak since 2009. The BOJ's rinban operation saw increased selling, further pressuring JGB futures.
Japan Sovereign Curve Source: Bloomberg Financial LP
Market Positioning and Risk Factors
Currency strategists, including NAB's Rodrigo Catril, suggest USD/JPY appears attractive to sell above ¥157, with an expected near-term trading range of ¥150-158, contingent on US 10-year Treasury yields staying below 5%. Market attention now shifts to upcoming US CPI data and potential policy implications for both economies.
Government Stance
Finance Minister Katsunobu Kato reiterated the government's readiness to address excessive currency movements, particularly those driven by speculators, while emphasizing close coordination with the BOJ on achieving price stability targets and ending deflation.
USDJPY (D1 Interval)
USDJPY has entered a critical zone associated with previous FX interventions. Following today's comments, the pair has declined below the 15-day EMA and slightly below the 78.6% Fibonacci retracement level from the downside movement. For bears, key targets include the 30-day EMA and 50-day EMA, followed by the 23.6% Fibonacci retracement level from the upside movement at 154.272. The RSI is signaling bearish divergence, suggesting waning bullish momentum, while the MACD is confirming the bearish sentiment with its lines widening, indicating an acceleration in downward momentum. Source: xStation
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