By surprise, the Bank of Japan widened the control range of the 10-year JGB yield curve from +/- 0.25% to +/- 0.5%. Markets reacted sharply, with JPY strengthening. TD Securities economists believe the USD/JPY slide will persist.
More JPY gains
“The BoJ widens the YCC band to +/- 0.5% by surprise. Although a change in the YCC range was the most plausible option in our view, the expansion was larger and ahead of schedule, without any prior sign. We hold the opinion that a broader policy change in terms of the policy breakeven rate and the JGB 10-year target will occur once a new BoJ Governor is in office. However, we do not rule out a further expansion of the range“.
“Despite the sharp move higher in the yen, we believe that it will extend further in the coming daysgiven how soon this change has occurred.”
“We also see a return to the value of currencies as a key driver for the currency space amid the USD spike. On that basis, the yen has much more room to run“.
“The main support for USD/JPY is at the 130/132 zone before reevaluating the extension. In the meantime, we see further extension to 90/95 in CAD/JPY and 135 in EUR/JPYalthough the latter will be less linear given the ECB’s hawkish tone.”
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.
