USD/JPY: A dovish BoJ might pull the yen somewhat lower tomorrow – Rabobank

Last week the US Federal Reserve dampened hopes of a quick economic recovery and put a cap on the previous weeks’ risk rally. Tomorrow is the turn for the Bank of Japan who is expected to deliver a dovish message that, according to the Rabobank FX analysis team, might trigger near-term weakness to the JPY.

Key quotes

“Even though the worst of the COVID-19 related crisis may be passed, it is very unlikely that BoJ Governor Kuroda will provide an outlook much brighter to that offered by Powell. Indeed, in view of Japan’s past propensity towards disinflation and deflationary forces and the country’s already huge pile of debt, there is a lot of keeping Kuroda awake at night.”

“We don’t expect the policy meeting to provide much direction for the JPY, though Kuroda’s comments may be sufficiently dovish to cause a modest softening in the currency. “