Rabobank’s Senior FX Strategist Jane Foley highlights that the Japanese Yen (JPY) remains the weakest G10 currency, with USD/JPY trading just below 160 on fears of Japanese Ministry of Finance (MoF) intervention. The bank’s central forecast sees USD/JPY at 158 in three months and 152 in six months, assuming a hawkish Bank of Japan (BoJ) and an easing-biased Federal Reserve (Fed).

BoJ and Fed meetings to steer Yen

"The JPY is the weakest performing G10 currency in both the month to date and the year to date. Having briefly tested the water above the USD/JPY160 level at the end of last month, the currency pair continues to hold just below that level, in part due to fear of FX intervention from Japan’s Ministry of Finance should the currency pair break higher."

"Next week, scheduled policy meetings from both the BoJ and the Fed will likely set the tone for USD/JPY. The absence of a rate hike from the BoJ next week could propel the currency pair above 160 and potentially force a reaction from the MoF."

"If the BoJ sidesteps a rate hike announcement on April 28, BoJ watchers will be expecting strong guidance that a move in June is likely. In the absence of either of these outcomes, the chances of a re-test of the USD/JPY160 level will increase."

"The near-term outlook for USD/JPY will also likely depend on the extent the FOMC leaves the door open for another rate cut this year. It is Rabobank’s central view that the Fed will ease again later this year."

"Rabobank’s central forecast is for a move back to USD/JPY158 on a 3-month view and to 152.00 in 6 months. This assumes both a hawkish position from the BoJ and an easing bias from the Fed."

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