View: JPY response to ‘Risk on’ phase should worry BoJ, SNB style Peg worth debating
Despite solid gains in US and European markets over the past few months that Asia heavyweight Japan has enjoyed rather limited luck with even the BoJ’s efforts to continue on the central bank easing bandwagon given short shrift by the market. The performance of the JPY specifically must be worrying for Japanese officials, particularly its unresponsiveness to the ‘risk on’ mood which in the past has provided exporters with some much needed breathing space. Indeed, USD/JPY has been stuck sub 80.00 throughout Q3, in stark contrast to price action in Q1 where a similar ‘risk on’ phase was enough to push the pair up around eight big figures back towards 84.00. The implications if the mood shifts don’t look particularly encouraging with this in mind, particularly given the ineffectiveness of the BoJ’s preferred tools of verbal then physical intervention to contain unwarranted/undesirable JPY appreciation.
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