Danske Bank: USD/JPY Likely to Stay Bearish Amid BoJ Rate Hike Prospects

According to Jens Nærvig Pedersen, FX analyst at Danske Bank, USD/JPY traded above 149 on Tuesday amid a risk-on sentiment.

Chart prepared by James Stanley; data derived from Tradingview

BoJ Poised for Another Rate Hike

"The Bank of Japan is widely expected to keep rates unchanged early Wednesday. However, reflation momentum in Japan remains strong, particularly after major corporations agreed to significant wage increases last week. The key question now is whether this trend extends to smaller businesses, which will be crucial for further rate hikes."

"We anticipate the BoJ will be ready for another rate hike in July. Meanwhile, the FOMC meeting on Wednesday is likely to have a greater impact on yen crosses than the BoJ’s decision. On a strategic horizon, we continue to favor short USD/JPY."

Key References:

• Bank of Japan Policy Outlook: BoJ's latest statements and market expectations (BoJ Official Website)