USD/JPY: Dovish BoJ underpins a weaker yen, but a peak in global risks eases pressure – MUFG

USD/JPY has moved back up closer to the 147.00 level after it hit a low yesterday of 145.11 after the Bank of Japan (BoJ) announced that it left its policy settings unchanged. Nonetheless, the pullback in yields outside of Japan provides some relief to the yen, economists at MUFG Bank report.

BoJ sticks to loose policy 

“The continuation of the BoJ’s loose policy settings leaves the yen vulnerable to further weakness and keeps the onus on direct intervention to dampen the pace of yen selling.”

“The Japanese authorities are at least getting some temporary relief from the pullback in yields outside of Japan over the past week which is helping to discourage speculative yen selling alongside the risk of intervention. After peaking at the end of last week, yields outside of Japan have dropped back sharply driven in part by building speculation over a dovish pivot for central bank policies amidst intensifying fears over a sharper slowdown/hard landing for the global economy.”

“The BoJ’s dovish policy stance continues to encourage a weak yen but downside risks are beginning to ease as global yields are beginning to peak in the near-term.”