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Sep 26 - 01:24 AM
USD/JPY: Looking To Sell Rallies; BoJ Scope To Cut Rate Increase On A Sell-Off To 104-105 - BofAML
First appeared on eFXplus on Sep 25 - 02:30 PM

Bank of America Merrill Lynch Global Research discusses USD/JPY outlook and maintains a structural bearish bias

The bar is high for the BoJ to cut the policy rate and the USD/JPY level is likely to be a key variable. We would sell USD/JPY (and vol) if it rallies on expectations for the BoJ from the current level.

The likelihood of the BoJ's rate cut would increase if USD/JPY sells off to 104-105, accompanying weakness in risk assets. However, we do not think a mere 10bp rate cut would contain the pressure. We expect the market to test the BoJ in such a scenario and volatility will rise," BofAML notes. 

"But the combination of fiscal easing, rate cut with supplementary measures, and more purchases of foreign assets by public/semi-public institutions, may prove effective in weakening JPY," BofAML adds. 

BofA Merrill Lynch Research/Market Commentary


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