Today, yen selling gained momentum following comments from BOJ Deputy Governor Uchida. His remarks, indicating skepticism toward a path of raising interest rates rapidly even if negative rates are lifted, were well received, leading to a sharp rise in the Nikkei average and pushing the USD/JPY pair from around 148 to the 148.60 range. Market participants are eyeing the year’s high of 148.89 set last week. Concurrently, other yen crosses are also being bought, marking a phase of yen weakness.
However, the dollar market remains mixed. The recent pause in the rise of US bond yields suggests a near-term adjustment phase. While EUR/USD and GBP/USD showed signs of breaking higher last week, they are now being retraced, returning to a range-bound pattern. The easing of dollar strength has provided support for the euro and pound.
This year is expected to see major central banks like the Fed, BOE, and ECB initiate rate cuts. Indeed, the rhetoric advocating for further rate hikes is fading away from various central bank officials. Nevertheless, concerns persist regarding geopolitical risks in the Middle East and persistent upward pressure on wages and service prices, leaving both markets and policymakers uncertain about the timing of rate cuts. In the short-term financial markets, the focus on the timing of rate cuts has shifted from early to late spring or summer, with the risk of further postponement into the second half of the year if a decisive reason for a slowdown in inflation does not emerge.
In the international markets ahead, it will be crucial to monitor the sustainability of the yen’s weakness following Deputy Governor Uchida’s remarks.
Following Deputy Governor Uchida’s press conference, there has been significant yen selling, contrary to market expectations. However, approaching the 150 level in USD/JPY, intervention from the Bank of Japan is anticipated, making further yen selling from this point risky. Instead of yen crosses, attention will be directed toward other currency pairs.