BOJ's Kuroda says further yen weakness is unlikely

Bank of Japan governor Haruhiko Kuroda downplayed chances of further dollar strength on Wednesday, saying that the yen is unlikely to fall any more in relative terms as it is already “very weak”.

Speaking in parliament, Kuroda also said the dollar was unlikely to rise against the yen if the Federal Reserve hikes interest rates, as much of the move may have been priced into markets already.

The yen surged following the comments, pushing the dollar to a two-week low of ¥122.75.

Dollar/yen was 1.03% lower after hitting an intra-day high of 124.63.

Societe Generale currency strategist Kit Juckes said: “USD/JPY is where it is because of the massive contrast between BOJ and Fed policy.”

“If policy ever re-converges, when the BOJ thinks about ending quantitative easing, when the as yet unborn Fed hiking cycle is fully priced in, there’s a lot of downside to USD/JPY. But in the interim, it’s still a ‘buy on dips’.”

He added that Kuroda’s observation that there isn't much more real effective weakness to come is an attempt to instil some stability. “Despite the violence of this morning’s correction, we’re in a range. And as we price in the start of the Fed cycle, we'll probably get closer to 130,” said Juckes.