USD/JPY: Dovish BoJ risks cap recovery – OCBC
|OCBC strategists Sim Moh Siong and Christopher Wong note that dovish-leaning Bank of Japan nominees have reinforced concerns that policy normalisation may lag, weighing on the Japanese Yen even as it remains fundamentally undervalued. The bank warns that intervention risk could rise if USD/JPY approaches 160 and keeps an end-2026 forecast of 149, maintaining a neutral stance on the pair.
Dovish nominees and intervention risk
"The JPY slipped as the JGB curve bear-steepened, reflecting market worries that the BoJ could fall further behind the curve after PM Takaichi nominated two policy board candidates with notably past dovish leanings."
"JPY and CNY remain fundamentally undervalued, but the recent Mainichi report and BoJ appointments reinforce a dovish perception, limiting the JPY’s ability to capitalise on its undervaluation."
"Intervention risk would return quickly if USDJPY drifts back toward 160."
"We remain neutral on the JPY."
"Our end-2026 USDJPY forecast stays at 149, as the currency is unlikely to transition from a funding currency to an investment currency unless the BoJ turns more hawkish than our baseline outlook of two rate hikes this year."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.