Yen Downside Remains Capped

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Yen Downside Remains Capped

Yen Downside Remains Capped Due To Boj - Bbh

According to BBH analysts, the downside of the Japanese Yen (JPY) will be very limited. This has to do with the fact that BoJ is very sensitive about the exchange rate of the JPY.

The Bank of Japan doesn't want a weaker JPY and thus will even intervene to prop up the local currency. For now, the USD/JPY is seen near the 150.00 handle.

Usd/Jpy To Find Support At 145.00

Looking ahead, the next key resistance for the USD/JPY will be around 152.00 and then 155.00. On the way down, the support for the USD/JPY is seen at 145.00 and then at 140.00.

The recent CPI reading from Japan was also mixed. As a result, the rate expectations from the BoJ will remain unchanged in the near-term.

However, a higher-than-anticipated surge in inflation could force the hands of the BoJ to raise the rates. It's worth noting that BoJ is one of the few banks which are bullish, while the rest of the central banks have turned bearish.

During the next two years, the terminal rate of the BoJ will be between 1% - 1.25%. As for the September 2025 meeting, the markets are pricing a rate hike of 25 bps.

Although the expected rate hike will be small, it still shows that the rate is rising higher. As a result, we can expect more upside in the Japanese Yen.

Another factor that supports the JPY is the BoJ's policy, which makes it clear that they don't want a weaker Yen. All of this shows us that the path of least resistance for the USD/JPY is towards the downside.

In that case, the USD/JPY is highly likely to drop below the 150.00 handle and move towards the 140.00. At the same time, we must also remember that US Dollar is expected to surge higher due to protective policies of the Trump government.

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