Barclays warns yen vulnerable as Bank of Japan rate hike expected
The Japanese currency could retreat toward the 152.50 level if expectations for faster central bank tightening and large-scale pension fund repatriation fail to materialize.
Barclays predicts the yen will move back toward the upper 150s per dollar if specific market conditions do not occur. The currency previously surged past 147 yen, driven by strong conviction that the Bank of Japan will raise its policy rate at its September meeting and by speculation about pension fund repatriation. Barclays states this recent advance relies on powerful expectations rather than fully established changes in capital flows or monetary policy. Consequently, the bank warns the currency remains vulnerable if either catalyst disappoints. Markets currently price a quarter-point increase to 1.25 percent. Policymaker Kazuyuki Masu noted the central bank could be forced to raise rates more rapidly if underlying inflation accelerates.
