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Citi Forecasts USD/JPY to Trade in ¥155-¥160 Range Ahead of BoJ Meeting
The U.S. dollar is expected to trade in a tight range against the Japanese yen ahead of the Bank of Japan's (BoJ) upcoming monetary policy meeting, according to analysts at Citi. The bank forecasts the USD/JPY pair will oscillate between ¥155 and ¥160 in the near term.
Citi's Outlook
Citi anticipates the Bank of Japan will maintain its benchmark interest rate at its current level during next week's meeting. The bank's analysts also noted that other major central bank meetings, including those of the Federal Open Market Committee (FOMC) and the European Central Bank (ECB), are unlikely to produce significant surprises, contributing to a period of consolidation for the currency pair.
Despite the expected range-bound trading, Citi suggested that a recent pullback in the exchange rate has created some room for a short-term rebound. This view is set against a backdrop of what the bank describes as a gradually more hawkish policy stance from the Bank of Japan.
AdIntervention Watch
The ¥160 level is a critical threshold to watch, according to the financial institution. Citi projects that if the USD/JPY exchange rate were to break above this level, Japanese authorities would likely initiate a new round of currency intervention.
The goal of such an action would be to strengthen the yen by buying it in the open market, with the aim of pushing the exchange rate back below ¥155. Meanwhile, Citi also expects the U.S. dollar to maintain its overall strength in the period leading up to the U.S. mid-term elections.
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