Bank of Japan Governor Suggests Interest Rate Hike, Market Still Betting on Weaker Yen

December 8th – Market chatter points to a likely Bank of Japan (BOJ) rate hike this month, yet investors are still betting the yen will keep weakening. Traders at Bank of America, Nomura Holdings, and RBC Capital Markets Canada note investor positions reflect this bearish yen bet. Citigroup’s “Yen Pain Index” remains deeply negative, signaling ongoing negative sentiment toward the currency. Even as BOJ Governor Haruhiko Kuroda has hinted at a near-term rate hike, and the bank is reportedly prepping to raise rates in December if the economy or financial markets don’t take a hit, investors are sticking to their yen bearishness. That’s because even if the BOJ acts, Japan’s yields are still expected to lag far behind those in the U.S.—a dollar-positive dynamic. Bank of America’s Asia-Pacific head of G-10 currency trading, Ivan Stamenovic, says: “Positions still favor betting the dollar will keep rising against the yen through year-end—this trend won’t shift unless the BOJ delivers a real surprise.” He adds Kuroda’s hawkish comments sparked debate on the pair, but there’s been no meaningful shift in market sentiment. (Source: FXStreet)