Bank of Japan Must Signal Hawkish Stance to Defend Yen, Market Prices Only 27% Odds for September Rate Hike

According to Bank of America strategist Shusuke Yamada, the Bank of Japan must signal hawkish intentions to successfully defend the yen, as swap markets price only a 27% probability of a 25 basis point rate hike in September.

Yamada noted in a report that while July rate increase odds remain extremely low, policymakers may need to guide market expectations higher for a September hike through communication. The next potential intervention threshold for USD/JPY is estimated at 165.

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