Credit Agricole CIB Research sees a scope for a lower USD/JPY into this week's FOMC policy meeting on Wednesday.
The focus for the JPY remains UST yields. Indeed, the JPY and CHF have been the worst performing currencies during the rise in UST yields as this rise is yet to significantly dent risk sentiment and equity markets. A dovish FOMC this week will bring some relief for the JPY against the USD, but will see it remain under downward pressure against commodity and cyclical currencies," CACIB notes.
"In terms of the FOMC, we expect the FOMC to signal via its dot plots and rhetoric that it will not be hiking rates anytime soon. It could also extend the exemption of UST’s from its supplementary leverage ratio calculation for banks, which would help them better absorb the rising supply of USTs and ease the upward pressure on UST yields," CACIB adds.