BUZZ-COMMENT-Japan FX angst will likely heighten CPI event risk

Credit: REUTERS/Thomas White

March 22 (Reuters) - This week saw the Bank of Japan raise its key policy rate for the first time since 2007, ending an era of negative interest rate policy, and while widespread anticipation of the move prevented yen appreciation there are a few cross currents now facing traders.

USD/JPY had rallied from 149 to just shy of the 2022-2023 highs around 151.90 since the decision, though Japanese officials appear likely refrain from currency intervention at 152.

It was notable that, local Japanese press reported that policymakers were weighing another rate hike in either July or October given the weakness in the yen. Meanwhile, the Japanese Finance Minister, Shunichi Suzuki, said that they were watching FX with a high sense of urgency.

Clearly, Japanese officials are not pleased with the recent moves in the yen. While this may slow the declines in the currency, BoJ officials reportedly considering a hike as soon as July will likely heighten event risk surrounding incoming inflation data, more so the Tokyo CPI figures - due March 28 - given that it is a lead indicator for the national print.

That said, seasonals continue to lean bearish yen until around the first week of April as Japanese fiscal year-end typically sees yen selling, but with U.S. yields hitting somewhat of a ceiling after the Federal Reserve stuck to three 2024 cuts, this should help offset yen weakness.

For more click on FXBUZ

BoJ watch Mar 22 https://tmsnrt.rs/3voCC88

(Justin McQueen is a Reuters market analyst. The views expressed are his own.)

((justin.mcqueen@thomsonreuters.com))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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