FxWirePro: Yen sell-offs likely to extend towards 115

The yen is facing the sharpest weakening against the dollar since the Bank of Japan (BoJ) introduced its monetary stimulus. After initial strengthening after Donald Trump’s win to 101.2 per dollar on 9th of November, in the past eight trading days, the yen has weakened by more than 9 percent. And we expect the weakness to continue.

Yesterday, Bank of Japan (BoJ) governor Haruhiko Kuroda surprised the market by offering to purchase unlimited quantities of 5-year and 2-year notes at -9 basis points and -4 basis points yield respectively. However, there were no bids as the rates were above the prevailing market rates but it showed that the Bank of Japan is committed to its monetary policies. That move weakened the yen further amid a stronger dollar. Treasury yields are on the rise, whereas the BoJ is suppressing the JGB yields. This is likely to lead to continued weakness in the yen as we suspect that yen to extend decline towards 115 per dollar. We originally suspected the yen to not to weaken beyond 111.5 area.