JPY: BoJ hike speculation continues to build – ING

Another day and another set of source stories ahead of next week's Bank of Japan meeting, ING’s FX analyst Chris Turner notes.

Dips may exhaust in the 153/155 area

“Today it was Bloomberg reporting that several officials felt a hike was likely. ING's economist covering Japan, Min Joo Kang, has been highlighting the risk of a January BoJ hike for a while – largely because the wage data has been coming in on the strong side. A 25bp hike in the policy rate to 0.50% is our call for next week.”

“Expectations of a BoJ hike (now priced at 80%) and perhaps fears of more FX intervention in the 158/160 area have helped the yen out-perform. Expect that to continue into next week's BoJ meeting.”

“However, dips may exhaust in the 153/155 area. Our rates team expect US Treasury yields to stay firm all year and the risk of 5%+ 10-year yields over coming months should support $/JPY.”