USD/JPY volatility on YCC revision speculation, but mood has changed

Reports that the Bank of Japan will revise its price outlook for 2023 upwards to the 2% range in its outlook report to be released at the end of this month have led to a sharp fall in the dollar-yen exchange rate to around ¥137.25 at one point, on speculation that a YCC change is possible if this is the case.

However, as the weekend was a three-day weekend, the dollar/yen reversed higher due to actual dollar buying, triggering a sharp rebound to around ¥138.50, triggering speculators to buy back shorts.

The general view was, however, that even if the USD/JPY reversed, if dollar selling continued in other currency pairs, there would be a limit to the dollar’s rebound.

However, the mood changed yesterday when BOJ Governor Ueda said, “If there is no change in the BOJ’s view that there is still distance to the 2% sustainable and stable price target, we will continue to persistently pursue monetary easing”, throwing cold water on the YCC revision and the dollar/yen started to rally.

Although the British pound and Australian dollar have sold off, the euro has not fallen, so the dollar and euroyen look good to buy.