JPY may strengthen. Overview for 16.10.2023

The Japanese yen paired with the US dollar remains stable at the beginning of the week. The current USDJPY exchange rate stands at 149.43.

USDJPY recently came close to the 150.00 level, a point where interventions could have taken place. The market is currently speculating that the yen might strengthen if the Federal Reserve ceases its interest rate hikes. At the same time, the Bank of Japan maintains its ultra-soft monetary policy despite domestic inflation indicators favouring interest rate increases. In this context, the BoJ might transition from its adaptive stance and embark on a gradual tightening of fiscal conditions.

However, all these are complex and broad issues.

On the surface, there is strong investor demand for safe-haven assets. The JPY is regaining its status as such, which could contribute to its strengthening.

The Middle East conflict is sparking market interest in safe-haven assets, and the yen could play a significant role in this environment.