Yen Bears Awaken as Fed Tips Hawkish While the BOJ Digs in

Yen bears may finally be sensing a window of opportunity.

Options traders are building up bullish bets on the greenback versus the yen, and both Westpac Banking Corp and National Australia Bank Ltd. see it weakening past 113 in the coming days after the Bank of Japan kept its loose monetary policy on Thursday. While other major central banks start to embrace tightening, the BOJ is holding fast to its position amid below-target inflation.

“With the BOJ set to be the last major central bank to exit stimulus, the yen should continue to weaken against the dollar, euro and pound,” said Mansoor Mohi-uddin, head of currency strategy in Singapore at NatWest Markets, a unit of Royal Bank of Scotland Group Plc.

The greenback’s revival after the Federal Reserve indicated it was still on track for another interest-rate hike this year has given yen bears something to cheer about. The currency slipped as much as 0.5 percent to 112.72 per dollar late-afternoon in Tokyo, while two-month risk reversals, a measure of puts over calls, has continued to climb.

Speculation over an early election in Japan has also fueled bearishness, and the currency is now down more than 4 percent since touching a 2017 high two weeks ago as simmering tensions on the Korean peninsula spurred a flight to havens.

BOJ members voted 8-1 in favor of the status quo Thursday, with the dissenter a dovish new board member who argued stimulus should be ramped up further. In comments after the decision, Governor Haruhiko Kuroda said the bank would do that if it was needed.

“This adds slightly to the yen-negative message from the overall decision, with no one arguing for an early reversal of current policy settings,” said Ray Attrill, global co-head of foreign-exchange strategy at NAB in Sydney.

— With assistance by Michael G Wilson

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