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Recent market expectations strengthen JPY selling - BTMU

FXStreet (Barcelona) - Lee Hardman, Currency Analyst at Bank of Tokyo-Mitsubishi UFJ views USD/JPY rally points to snap election & sales tax delay being already priced.

Key Quotes

“The recent market expectation to reschedule sales tax hike strengthened bullish sentiment for the Japanese equity markets and JPY selling. However a possible weak Q3 GDP report and the Diet being dissolved for an election in December may not be lift USD/JPY much further.”

“Firstly, the BoJ may not support the delay of fiscal austerity, which might shift some focus to policy disagreements, especially given the BoJ’s action on 31st October indicated its support for the sales tax hike.”

“Secondly, the yield gap between US and japan has also not been widening as of yet. Next week, the US CPI data may be weak due to the recent commodity price drop. A moderate CPI print may encourage US treasury yield to fall and US dollar selling.”

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