Japanese yen nears critical 160 mark as BoJ hints at rate hike

BOJ meeting minutes discuss rate hike and yen weakness

In the early hours of Monday morning, the minutes of the June Bank of Japan (BoJ) meeting were released. Two members appeared in favour of a rate hike in a timely manner, with one member mentioning, ‘must raise interest rate in a timely fashion without delay in accordance with the heightening chance of achieving the price target’. The other pointed to the continued Japanese yen (JPY) weakness, stating, ‘weak yen could lead to overshoot in inflation, which means the appropriate level of policy rate would be pushed up’.

However, there was a balance, with other members weighing in to highlight sub-optimal consumption levels and the need to wait for incoming data before jumping to the conclusion that inflation is on a definite uptrend.

JPY index analysis

A simple index of Japanese yen performance points to a continued decline as the currency approaches a very dangerous level seen in USD/JPY (大口）.

JPY index chart

Possible FX intervention as JPY weakens

USD/JPY (大口） rose in the early hours of Monday morning, falling just shy of the 160 mark, which is largely seen as a tripwire for foreign exchange (FX) intervention. At the end of April, Japanese officials spent $62 billion in a massive effort to strengthen the yen and reduce the level of undesirable volatility.

USD/JPY technical analysis

USD/JPY (大口） moves above 160.00 may be short-lived. The pair is fraught with risk, given how FX intervention typically results in excessive volatility, as the pair has previously moved about 500 pips in a day. A natural level of support appears at 155.00, with dynamic support at the 50-day simple moving average appearing before it, around 156.20.

USD/JPY daily chart

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