Brown Brothers Harriman (BBH) Elias Haddad notes that USD/JPY has rebounded toward 157.75 after testing 155.00, with 160.00 described as a key line in the sand. Haddad says the Bank of Japan's (BoJ) April Summary of Opinions did not materially shift rate expectations, though it signals a lower bar to hike. Markets still price about 75% odds of a 25 bps BoJ rate increase to 1.00% next month.

Yen pressured as BoJ stays cautious

"USD/JPY rebounded to 157.75 after testing a two-month low near 155.00 last week, with 160.00 remaining the major line in the sand on the topside. The Bank of Japan (BOJ) Summary of Opinions from the April 27-28 board meeting did not move the needle on rate hike expectations. The swaps market continues to price-in about 75% odds of a 25bps BOJ rate hike to 1.00% next month."

"The April Summary of Opinions reflected the 6 hold-3 hike votes split while signaling a lower bar to raise rates. One member noted “it is quite possible that the Bank will raise the policy interest rate” at the next June 16 meeting. Another key quote was “the Bank should raise the policy interest rate soon.”"

"Japan's Finance Minister Satsuki Katayama was deliberately vague on whether intervention took place on April 30 and May 6. Katayama said “regarding recent currency moves, we confirmed that Japan and the US have been coordinating very well and have maintained close communication.”"

"We suspect the latest intervention on was around ¥5 trillion based on the 2024 playbook – the last time the MOF/BOJ intervened to curb JPY weakness - and scale of USD/JPY pullbacks. The MOF’s report on Foreign Exchange Intervention Operations for April 28 through end-May will be released on May 29."

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