The yen fell after the Bank of Japan delivered an expected 25bp rate rise,
following an earlier hawkish Fed hike that had already pressured the currency.
Earlier this month the yen had rallied on bets of faster BoJ tightening, unwind
of yen funding arbitrage and speculation that Japanese pension funds would
repatriate assets. Strategists warn that if markets conclude the BoJ cannot
tighten as fast as the Fed, USD/JPY could move toward 160. With 25bp largely
priced in, Friday’s decision or any subsequent communication read as dovish
would raise that risk. The latest leg lower has put intervention risk back on
the table; officials have stressed concern about the speed and disorderliness of
moves rather than a specific level, but another push near 160 could test their
tolerance. Traders will watch Governor Ueda’s post-decision press conference for
guidance on the pace and scope of further tightening.
