OCBC strategists Sim Moh Siong and Christopher Wong note that USD/JPY is again approaching 160 as the US Dollar (USD) benefits from safe-haven flows and Japanese authorities reiterate intervention readiness. Their base case is a 25bp Bank of Japan (BoJ) hike to 1.0% on 28 April, but they warn that a hawkish hold or failure to hike could push USD/JPY higher and trigger Ministry of Finance (MoF) action.

BoJ hike doubts and MoF threat

“USD/JPY is approaching 160 again, sharpening focus on whether the BoJ can avoid looking behind the curve. Our base case remains a 25bp hike to 1.0% on 28 April, although markets are pricing a meaningful risk of a hawkish hold.”

“Failure to hike would likely push USD/JPY into the 160s, increasing the risk of Ministry of Finance intervention aimed at driving the pair back toward 155.”

“Meanwhile, the SNB and Japanese authorities reiterated their readiness to intervene to limit CHF strength and JPY weakness.”

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