Amid a series of source-based reports over the past two weeks, the market now assigns less than a 20% probability to a 25 basis point Bank of Japan (BoJ) rate hike this Thursday. ING’s FX analyst Chris Turner notes that USD/JPY appears biased toward the 155 level ahead of the rate decision.
USD/JPY Bias Toward 155
“Our team believes the chances of a rate hike are higher. However, the BoJ’s decision may be influenced by the level of USD/JPY, which has recently climbed to around 154, driven by both these source reports and the recent sell-off in US Treasury yields.”
Medium-Term Outlook
“While our medium-term valuation models suggest the yen remains the most undervalued currency within the G10, our baseline forecasts indicate USD/JPY could steadily rise through 2025 as US Treasury yields continue to increase. The yen will likely act as a hedge during periods of risk asset corrections in 2025, but barring unexpected US macroeconomic weakness, USD/JPY should remain bullish in the year ahead.”
Short-Term Expectations
“For this week, we maintain that USD/JPY looks biased toward the 155 level ahead of the BoJ rate meeting on Thursday.”