Amben: If the United States does not experience a recession, it is unlikely that the Japanese Yen will continue to appreciate
Benesse Asset Management's Chief Investment Officer Zhou Yutian stated that after the Bank of Japan's interest rate decision, the USD/JPY pair fell from the 162 level. Due to expectations that the Federal Reserve may cut interest rates earlier in September, coupled with the decline in large-cap tech stocks, the yen received support. However, the likelihood of the yen continuing to appreciate is small if the U.S. does not experience a recession or if the Federal Reserve is not more dovish than market expectations. It is expected that the USD/JPY pair may turn towards levels above 155. Additionally, with the Bank of Japan raising interest rates, opportunities to re-engage in USD/JPY arbitrage trading will increase
According to the Wise Finance APP, Zhou Yutian, the investment director of Ambow Diversified Assets, commented after the Bank of Japan's interest rate decision, pointing out that the yen was strong in July. Following the earlier intervention by the Japanese Ministry of Finance after the lower-than-expected U.S. CPI in June, the USD/JPY fell from the 162 level. The market's expectation of an early rate cut by the Federal Reserve in September also supported the yen in the weakening U.S. dollar index. Recently, with the decline of large tech stocks, the closure of crowded USD/JPY arbitrage trades also gained momentum.
Looking ahead, although there may still be some room for closure before this week's Federal Reserve and Bank of Japan meetings, it seems unlikely for the yen to continue to appreciate if the U.S. does not experience a recession or the Federal Reserve does not adopt a more dovish stance than market expectations. After the previous surge in volatility stabilized, the yen's strength gradually weakened, and the possibility of the USD/JPY turning towards the 155 level or above is higher. Before the Bank of Japan's decision yesterday, given that hedge funds have closed out over 80% of their largest short positions since May, the downside potential for the USD/JPY falling below 152 (above the support level) is limited.
Furthermore, if stocks stabilize, the safe-haven demand for the yen is expected to diminish. As the Bank of Japan raises the policy rate by 25 basis points, it will provide a better entry point for re-engaging in USD/JPY arbitrage trades. Based on past performance, regardless of whether the Bank of Japan raises interest rates or not, unless the central bank clearly signals a hawkish stance on future rate hikes, the USD/JPY usually rises