The JPY has been under pressure of late, mainly due to stabilising risk sentiment and somewhat rising expectations of the BoJ moving closer towards considering further monetary stimulus.
Weak growth conditions and external factors such as weak oil prices dampening the impact on price developments have been decreasing the probability of the central bank reaching its 2% inflation target anytime soon. Indeed BoJ Governor Kuroda confirmed this week that the central bank may fall behind the schedule of achieving 2% inflation next year. Nevertheless, for now their base case remains for growth momentum to re-accelerate in the months to come.
This in turn suggests little scope of them considering additional policy action this week. From that angle the JPY should be driven still by external factors such as global risk sentiment.
Assuming the Fed will refrain from tightening monetary policy this week we see scope of falling safe haven demand to the detriment of the currency. However, it must still be noted that China-related uncertainty will keep markets unstable.
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