The Bank of Japan may raise interest rates again! If the US and Japan fall below 148.50, it will end the temporary upward trend
2024-08-02
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Due to market expectations that the Bank of Japan will further raise interest rates, the yen may be at the forefront of a trend shift. This is based on a new assessment by Mitsubishi UFJ, which currently comes at a time when the Japanese yen is rising. After the Bank of Japan raised interest rates on July 31st, the rise of the yen accelerated.
Mitsubishi UFJ foreign exchange analyst Lee Hardman said, "On July 31st, the Japanese yen accelerated its rise after the Bank of Japan announced its latest hawkish policy. The Bank of Japan stated that they are more willing to continue raising interest rates to normalize Japan's monetary policy.
He added, "Given the policy update from the Bank of Japan, we now expect the Bank of Japan to raise interest rates twice more this fiscal year.
Bank of Japan Governor Kazuo Ueda has laid the foundation for further interest rate hikes. He said that the current inflation adjusted real policy interest rate is still "very negative", "far below" Japan's uncertain neutral interest rate level.
Hardman said, "If the Japanese economy continues to align with the latest economic outlook of the Bank of Japan, this leaves room for further interest rate hikes
The recent strong rise of the Japanese yen means that some key exchange rates based on the yen may reverse their trend.
Hardman stated that the rise of the Japanese yen accelerated after the US dollar fell below the technical support near the 200 day moving average. Afterwards, the currency pair further fell overnight and broke below the support of the uptrend line, falling towards the low point of 148.50 at the beginning and end of 2023.
He believes that if the US dollar falls decisively below the 148.50 level against the Japanese yen, it will end the upward trend that has been present since the beginning of 2023, marking a decline in the US dollar against the Japanese yen towards the mid to low level of 140.00 by the end of the year.
USD/JPY daily chart
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