BoJ: Disappointment likely for USDJPY, but a shallower dip is expected – Nomura

Research Team at Nomura, suggests that the BOJ’s decision on the immediate rate cut or not will be crucial for USD/JPY initially, as market views are divided.

Key Quotes

“A decision not to cut rates, as we expect, will likely send USD/JPY to 100.50, and the risk of USD/JPY testing 100 cannot be ruled out. However, we judge JPY’s depreciation will be more moderate than in July and we expect dip-buying demand ahead of the FOMC meeting.

We think a decision to cut rates immediately will initially send USD/JPY to around 103, but a sustained rise in USD/JPY is uncertain. Market expectations for measures to steepen the curve are relatively high and we do not necessarily expect just a tweak to influence JPY much.

However, if the BOJ provides further steepening surprises and the market sees a higher risk of tapering, USD/JPY momentum will likely be hit via negative risk sentiment effects.”