Derived Data That Drive Results
Danske Bank provides a reaction to the recent decision by the Bank of Japan (BoJ) to adjust its Yield Curve Control (YCC) policy.
Key Points:
-
BoJ Decision: The BoJ has introduced more flexibility to its YCC policy, which Danske Bank sees as a step towards monetary policy normalization in Japan. Further adjustments to the policy are expected within the year, but these are contingent on inflation and global developments.
-
Market Reaction: The market response to the BoJ's decision has been volatile, with the USD/JPY experiencing notable swings. The 10-year JGB yield surged around 10 basis points to 0.57%.
-
USD/JPY Forecast: Rising Japanese yields could exert upward pressure on the JPY as global interest rates peak. Danske Bank maintains a bearish stance on USD/JPY, citing its overvaluation from a fundamental perspective. The bank predicts further tweaks to the YCC policy this year, with an expected exchange rate of 127 in 6 months and 125 in 12 months.
Summary:
Danske Bank interprets the BoJ's decision to modify its YCC policy as a move towards normalization. The market response has been volatile, with significant swings in the USD/JPY. Despite this, Danske Bank remains bearish on USD/JPY and expects further policy adjustments in the coming year.
