USD/JPY climbs above 200-Day MA – BBH

USD/JPY broke above its 200-day moving average (148.51) yesterday and clutching its gains, BBH FX analysts report.

BOJ minutes hint at rate normalization

“The Bank of Japan’s (BOJ) July 30-31 policy meeting minutes offered a preview of the bank’s September hawkish hold which saw two members vote in favor of resuming rate hikes. According to the July minutes one member noted that the BOJ ‘should not become overly cautious and miss the opportunity to raise the policy interest rate,’ while another member argued that it was possible for the BOJ ‘to exit from its current wait-and-see stance, perhaps by the end of 2025 at the earliest’.”

“The swaps market price-in 54% odds of a 25bps BOJ rate increase to 0.75% at the next October 30 meeting. Our base case is for the BOJ to resume normalizing rates in October. Japan’s Tankan business survey points to an ongoing recovery in real GDP growth and underlying inflation is making good progress towards the BOJ’s 2% target.”

“Bottom line: we expect USD/JPY to hold under 150.00, especially considering that it’s trading well-above the level implied by US-Japan 2-year bond yield spreads.”