Yen entering period of calm as bulls reconsider
Yen bulls may be in for a period of soul searching as the forex market works through new uncertainties about BOJ tightening.
Since the Japanese central bank raised rates in July BOJ speakers have leaned in favor of tightening as domestic growth and inflation dictate.
Fast forward two months and Ueda appears to be backpedaling on policy tightening. He cites "uncertainty" about recent economic developments overseas and the impact of the yen’s surge as reasons to be cautious.
Ueda's less hawkish tone raises questions about BOJ tightening for the remainder of the year, leaving real rates deeply negative in the meantime and increased focus on inflation data in October to guide market expectations.
Meanwhile, expected rate cuts by other major central banks should keep volatility under wraps and selectively encourage risk taking. As sentiment improves, the yen will underperform against risk sensitive peers. Versus the greenback, U.S. data in October and Treasury yields will dominate direction.
Until the first set of data in October, positioning may be light. Some levels to watch during the final week of a Japanese half-year end include the 141.75 Sept. 6 low, the 145.25 Aug. 21 doji close and the September high of 147.20.
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Yen Chart https://tmsnrt.rs/3Y1nitP
(Robert Fullem is a Reuters market analyst. The views expressed are his own.)
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