May inflation data in Tokyo surprised up, Chris Turner, ING FX analyst points out.
The risks are clearly biased for the USD/JPY
“With 3.6% year -on -year, reading without food was the highest since the beginning of 2023. The data supports their opinion that the risk of a rates of the Bank of Japan in July is underestimated by the market. Currently, investors only assign a probability of 14% to such a result.”
“A rise in July would certainly support Yen. It would also make it a little less expensive for Japanese holders to cover their assets in the US. Investors of a region of low interest rates (that is, Japan) tend to have lower coverage ratios in US assets.”
“Clearly, a reduction in coverage costs would add to the current narrative that the global investment community wants to increase its dollar coverage ratios. We have a provision of 140 for the end of the USD/JPY year. But the risks are clearly biased down here.”
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.
