Sakurai Reinforces BOJ Stance, US Dollar Bears May Look Away From USDJPY
"Underlying price growth remains moderate and uncertainties on overseas economies persist," said Bank of Japan (BOJ) board member Makoto Sakurai on Thursday, "it is therefore crucial to patiently maintain our monetary easing." Sakurai's comments followed Wednesday's publication of the minutes of the Federal Reserve's May 2-3 policy meeting, minutes that led futures traders to scale back somewhat their expectations of the number of US rate hikes still to come this year.
Less aggressive US rate hike expectations, reflected in US Treasury yields, feeds into a lower Japan-US yield differential. That could undermine the attractiveness of selling the yen for the US dollar. Sakurai's comments arguably redress the balance somewhat by re-emphasising that the Bank of Japan will be sticking to its own ultra-accommodatory stance.
Traders will have to make up their own minds but there's certainly an argument that as the BOJ seeks to ignite inflation, a weak yen is a useful tool. US dollar bears could conclude there are other more fruitful furrows to plough than dollar/yen (USDJPY).
Written by Neal Kimberley, External Currency Analyst.
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