Brown Brothers Harriman’s (BBH) Elias Haddad notes USD/JPY is trading in a 155.00-160.00 range and expects this to persist until the energy shock fades, despite a constructive stance on Japanese Yen (JPY). Haddad highlights increasingly hawkish signals from the Bank of Japan (BoJ), with Masu’s comments and prior dissents supporting the case for a June rate hike, which markets price at 75% odds.

JPY constructive but capped by energy shock

"USD/JPY is holding near the middle of a more than two-month 155.00-160.00 range. We remain constructive on JPY. But until the energy shock fades, USD/JPY will likely continue to trade within that range."

"The Bank of Japan (BOJ) is turning more hawkish. BOJ board member Kazuyuki Masu said “if statistical data do not indicate clear signs of an economic downturn, I believe it is desirable to raise the policy rate at the earliest stage possible.”"

"Masu’s remarks strengthen the case for a June rate hike, especially after three other BOJ members (Nakagawa Junko, Takata Hajime, and Tamura Naoki) dissented in favor of tightening at the last April meeting. The swaps market continues to price-in about 75% odds of a 25bps BOJ rate hike to 1.00% for the June 16 meeting."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)