Traders maintain short yen positions despite expectations of a 25 basis point Bank of Japan hike, focusing on UST-JGB spread dynamics.
USD/JPY traded in a 159.74-160.28 range overnight, with dips quickly bought despite lower oil prices and anticipation of a 25 basis point Bank of Japan rate hike. Speculative short yen positioning has reached multi-year highs, pressuring the currency even as a BoJ move appears certain.
Markets are pricing in a 25 basis point hike by the BoJ, but attention remains on factors that could narrow the 2-year UST-JGB spread and reduce intervention risks. Support is seen at 159, with resistance at 161.20, as traders position for a potential hawkish Fed hold.
The yen’s weakness persists despite the expected BoJ action, highlighting concerns over broader monetary policy divergence and speculative flows.