Yen Slides to 15-Year Low; BoJ Springs Surprise Bond-Buying

Hello Traders!

Welcome to the Monthly Market Pulse

The yen has surged at the latest Bank of Japan meeting on Tuesday, with USDJPY shooting well past the major psychological resistance of 150. This comes after the BoJ changed it stance on its controversial yield control curve (YCC), changing its strict 1% cap to a 1% “reference point”, allowing rates to ease above 1%, at which point the BoJ will react accordingly.

While the move technically is - and has been presented as some manner of - tightening, markets don’t seem to be convinced, with yen speculators taking the currency past 151. The 10-year Japanese Government Bond (JGB) rose to 0.970% in response; before retreating slightly and consolidating on the BoJ’s announcement of emergency bond-buying.

Already, there has been two separate occasions of speculated BoJ intervention on 3rd and 17th October, which saw sudden spikes in the yen. That said, market forces seem to have prevailed as the wider trend continued betting on yen weakness on those two occasions.

What’s might be different this time round though, is the BoJ’s active pledge to discourage speculation; a move that might strike some wariness into investors and threaten a couple of stop-losses. After all, the BoJ is no stranger to surprise announcements and actions - an approach that has greatly diverged from its fellow G-10 central banks’.

That said, inflation is still near 4-decade highs, and analysts foresee a trot towards policy normalisation (i.e raising interest rates). The question is, how slowly? And what other surprises will the BoJ spring along the way? The answer for yen traders is: keep a close eye on those stops.

What to Pay Attention to

• A significant move to normalisation by the BoJ might see outflows from the bonds of other major economies, especially from Japanese investors.
• We’ve still got two major wars going on and oil and gold prices will likely stay elevated. That said, OPEC can increase output but gold mining companies aren’t likely to greatly increase production - so that’s food for thought.

What’s New at PU Prime

Other Perks for You