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Mar 13 - 09:55 AM

Danske: It's a Close Call for BoJ to Hike Rtes in March or April but We Stay Structually Bullish on JPY

By eFXdata  —  Mar 13 - 09:16 AM

Synopsis:

Danske Bank addresses the speculation surrounding the Bank of Japan's (BoJ) potential rate hike, noting the close call between March and April for the policy shift. Despite the anticipation for a rate hike at the March 19 meeting, Danske maintains April as its base case. The decision timeline does not alter Danske's bullish view on the Japanese yen (JPY) for 2024, with expectations of substantial appreciation.

Key Points:

  1. BoJ Rate Hike Speculation: USD/JPY experienced volatility, responding to fluctuating expectations regarding the BoJ's imminent policy adjustment. Recent headlines hinted at a possible March rate hike, yet broad USD gains post-US CPI have pushed USD/JPY above 147.
  2. Rationale for April Rate Hike: Danske anticipates the BoJ will hold off until April, allowing for a more comprehensive assessment of annual spring wage negotiations and other pivotal economic indicators, including the Tankan Q1 survey.
  3. Strategic Patience: The BoJ's decision, whether in March or April, hinges on broader labor market impacts and upcoming economic data. April offers the advantage of coinciding with updated economic projections, providing a strategic backdrop for any policy shift.
  4. Bullish on JPY: Regardless of the specific timing of the BoJ's rate hike, Danske maintains a bullish stance on the JPY throughout 2024, projecting notable strength against the backdrop of potential policy normalization.

Conclusion:

The timing of the Bank of Japan's anticipated exit from negative interest rate policy is a nuanced decision, with implications for market dynamics and currency valuation. Danske Bank's analysis suggests that an April adjustment remains the most plausible scenario, aligning with strategic considerations and the availability of critical economic data. Regardless of the exact timing, Danske's outlook for the Japanese yen remains robustly bullish, underscoring the currency's potential for appreciation in a year of significant policy transitions.

Source:
Danske Research/Market Commentary

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