Yen May Not Stop at 105 Even in Short Term
Last week has been filled with speculation that Bank of Japan (BOJ) may extend its monetary stimulus on Thursday, especially after negative rates loan rumor, but they didn’t. And a week before, market was speculating, at what point, BOJ will lose its patience and intervene in currency market to weaken Yen. The level that has been widely considered is 105 per Dollar, beyond which BOJ is expected to lose patience.
But after last week’s no action policy meeting, there are several factors to consider.
- BOJ had March’s inflation figure for the nation and April’s figure for Tokyo, ahead of policy announcement, which showed Japan once again dipped into deflation. So if BOJ wanted to act, it had reasons to justify the action. By choosing, not to act, it may have signaled its patience until the next meeting on June 15th.
- With no competitive devaluation agreement among G-20 nations, it will be difficult to justify such actions as direct intervention. But still it may choose to curb volatility, like Reserve Bank of India has been doing.
So, at current momentum, Yen may break below that 105 level before any significant rebound takes place.
We rather prefer 103.5-102 area, more susceptible to a rebound.