In the foreign exchange market next week, with the Bank of Japan’s monetary policy meeting to be held on the 17th and 18th ahead, persistent speculation of policy revisions is likely to put pressure on the yen.In some cases, the Yield Curve Control (YCC) policy continued from December last year.ReviewThere is also a view that the yen will appreciate further and exceed 125 yen if there is an actual correction.
| dollar/yen | Data: As of 2:48 p.m. |
|---|---|
|
weekly forecast (Bloomberg exchange rate forecast model) |
¥125.34 to ¥132.88 |
| 1-week forecast volatility | 20.5050％ |
| 1 week risk reversal | 1.8100% yen callover |
Perspectives of market participants
Mizuho Bank Chief Market Strategist Kengo Suzuki
- Expectations are high for additional revisions at next week’s Bank of Japan meeting.However, realistically, changes are expected under the new governor from April onwards, and in the case of a change this time, there is a possibility that the yen will appreciate beyond 125 yen as a surprise.
- Even if there is no change, if the YCC policy is to be implemented with the aim of flexible operation, it is likely that the yen will appreciate as if it had been changed because of the speculation that interest rate hikes would be permitted.
- Even in this case, it is expected that the pair will test the 125 yen.However, I think there is a possibility that it will bottom out for a while.
Hiroyuki Machida, Director, Foreign Exchange and Commodities Sales, Bank of Australia and New Zealand
- Next week’s meeting of the Bank of Japan will be the most watched event, but we assume that there will be no consecutive revisions since the December meeting of last year, and that the permissible fluctuation range for the 10-year interest rate will remain unchanged at 0.5%.If Governor Haruhiko Kuroda’s press conference does not change much, the yen may sell back.
- About 30% of the fall in the dollar and yen on the 12th was due to a decline in US interest rates due to a slowdown in the US consumer price index (CPI), and 70% was due to the Bank of Japan’s policy revisions.
- However, the return may not reach 130 yen.Expectations such as policy revisions and the abolition of YCC are expected to continue to smolder at each meeting, and the bearish trend of the dollar/yen will not change.
Next week’s featured events
- 18th: Bank of Japan Monetary Policy Meeting, Policy Announcement and Outlook Report released.Press conference by Governor Kuroda
Main schedule for next week
- 16th: U.S. holiday (Lunar King Memorial Day)
- 17th: US NY Fed manufacturing index for January, New York Fed President Williams gives a speech
- 18th: Remarks by the presidents of the Federal Reserve Banks (Atlanta Fed, Philadelphia Fed, Dallas Fed), U.S. retail sales in December last year, U.S. producer price index in the same month, U.S. industrial production in the same month, U.S. Beige Book released
- 19th: Japan 20-year government bond auction, Fed President Boston and NY Fed President give lectures, Fed Vice Chairman Brainard gives a lecture
- 20th: Nationwide CPI last December, US housing starts last December, US new unemployment insurance claims, US Philadelphia Fed manufacturing index in January, Philadelphia Fed President’s speech, Fed Governor Waller’s speech
