Interest charge

USD/JPY is in control but targets 150.00 in the longer term

  • USD/JPY bulls are still under pressure ahead of central banks this week.
  • The Fed and the BoJ will be watched for the coming week.

USD/JPY fell from 143.69 at the end of the week to a low of 142.83 as the greenback dipped slightly on Friday but recorded a gain for the week as traders remain of the view that the US Federal Reserve will stick to an aggressive course when it raises interest rates this week.

The US dollar found some support as consumer confidence improved slightly in September. The University of Michigan’s September preliminary reading of the overall consumer sentiment index came in at 59.5, down from 58.6 the previous month. Economists polled by Reuters had forecast a preliminary reading of 60.0 in September. The greenback’s DXY index which measured it against a basket of currencies fell 0.1% on the day to 109.68. It hit a two-decade high at 110.79 earlier this month. For the week, it was up 0.6%, and it’s up about 15% for the year so far. Markets expect the Fed to hike 75 basis points with the possibility of a 100 basis point hike.

Outside of the Fed, the Bank of Japan is expected to maintain its dovish stance at its September 21-22 meeting. It has generally communicated that it has no plans to raise rates or change its dovish policy stance to support the yen. Meanwhile, Rabobank analysts argued that USD/JPY 140 could be problematic for Japan, which imports a substantial proportion of its energy.

”However, it is often the pace and volatility of currency movements that prove more worrisome to policy makers rather than a certain level. Either way, the move back towards 142.00 this week will be welcomed by Japanese officials. That said, we believe USD strength will continue for a few more months. It is also possible that the BoJ will maintain loose policy settings until next year. This suggests a possibility for USD/JPY to head higher in the coming months. A jump to 150 cannot be ruled out.”