USD/JPY HOLDS ABOVE 159 AS HIGHER JAPAN YIELDS FAIL TO LIFT THE YEN — SOCIETE GENERALE
The Japanese Yen remains one of the weaker-performing G10 currencies in August despite rising domestic bond yields and expectations of further monetary tightening by the Bank of Japan, according to Societe Generale strategists.
Societe Generale economists estimate that the BoJ could deliver an additional 75 basis points of tightening by this time next year. Under that scenario, the 10-year Japanese government bond yield could rise toward 3.50%.
However, higher Japanese yields have so far provided limited support to the Yen in the foreign-exchange market. Societe Generale noted that even the prospect of Japanese 10-year yields moving above comparable German yields has not been sufficient to materially improve demand for the currency.
For USD/JPY, the technical picture remains an important reference. The pair has moved back above its 200-day moving average and is trading above the 159 level, keeping this area in focus for near-term price action.
The divergence between rising Japanese yields and the Yen’s relatively weak performance remains a key factor for USD/JPY. Market participants will continue to assess whether expectations for additional BoJ tightening translate into stronger Yen demand or whether the pair continues to hold around its current technical levels.
The 75-basis-point tightening estimate and 3.50% 10-year JGB yield projection are Societe Generale institutional forecasts, rather than confirmed Bank of Japan policy outcomes.
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