USD/JPY has hit a fresh intra-day high at 128.33. Economists at MUFG Bank expect the pair to near the 130 level.

Speculative yen selling has been ramped up

“St Louis Fed President Bullard stated that the Fed should not rule raising rates by 75bps, but it is not his base case here. He believes the Fed needs to move quickly to raise its key policy rate to around 3.50% this year. The hawkish comments will continue to place upward pressure on US yields in the near-term that in turn are reinforcing the yen sell-off.”

“Governor Kuroda continued to reiterate that a weak yen is still positive for Japan’s economy although very rapid moves fuel negative effects including changes in corporate plans. There was no indication though that the BoJ was ready to tighten policy anytime soon to provide more support for the yen. It leaves the yen vulnerable to further weakness in the near-term with no clear fundamental trigger to prompt a reversal of the current bearish trend.” 

“Market participants will be increasingly targeting the 130.00-level for USD/JPY and then beyond the highs from in early 2002 at just above the 135.00-level.”

“The latest IMM report highlights clearly that speculative yen selling has been ramped up in anticipation of further weakness.”