The Bank of Japan (BoJ) has ended eight years of negative interest rates. The USD/JPY spiked above 150.00 following the decision. The economists of ING analyze the prospects of the Yen.
The rise of the BoJ weakens the Yen
Gone are negative interest rates, yield curve control, and purchases of ETFs and real estate investment funds. Instead, excess reserves at the BoJ will now be remunerated at 0.10% and the BoJ will target the overnight interest rate (its main interest rate) in a range of 0.0%-0.1%.
The Yen sold off on headlines that the BoJ would remain accommodative for some time, but the latest headlines suggest that further rate hikes could be coming now that the virtuous link between wages and prices has been confirmed.
The problem for the Yen, however, is that volatility remains exceptionally low and the carry trade exceptionally popular. At the moment, the USD/JPY pair could trade in a range of 150.00-152.00 (in Tokyo they believe that the BoJ will not intervene to sell USD/JPY until 155.00), and a drop in USD/JPY will have to be directed from the Dollar side.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
