Head of Asia Macro Strategy on yen weakness and Fed policy (with Yvonne Man, April Hong)

Jeff Ng expects the dollar to remain a headwind for the yen in the near term due to US exceptionalism and hawkish Fed rhetoric. He believes the BOJ is focused on stability and pace of moves, not just levels, and would intervene if the yen weakens too quickly. His year-end forecast of 155 for USD/JPY relies on a moderation of Fed hawkishness and lower energy prices later in the year.

Yields

explicit

RUT

Oil

implicit

explicit

SMBC 9.0
Commercial Bank
Jeff Ng 8.0

Head of Asia Macro Strategy on yen weakness and Fed policy (with Yvonne Man, April Hong)

dxy

The dollar is moving between... US exceptionalism, hawkish Fed rhetoric since June and that could persist in the coming one, two months.

metals

He notes that gold and bitcoin are 'really struggling' on the other side of the dollar trade, implying a bearish near-term view.

ndx

We still expect that the equity market could still be relatively supported by AI demand... including robotics as well.

April Hong

Asks if policymakers can constrain yen weakness given the dollar's strength.
Jeff Ng

The dollar is moving between risk aversion and US exceptionalism/hawkish Fed rhetoric, which will persist for 1-2 months. This will continue to be a headwind for the yen, as the BOJ has relatively low rates.
Yvonne Man

Asks how to interpret the Finance Minister's language about 'bold actions' and coordination with the US.
Jeff Ng

The comments indicate the BOJ is monitoring closely, focusing not just on the level but the pace of the yen's weakening. If it weakens too quickly towards 163 or higher, they are ready to take forceful action to stabilize the market, though they won't go against the trend.
April Hong

Asks if the yen weakness raises the risk of competitive devaluation.
Jeff Ng

Japan is focused on currency stability, not devaluation. They don't want excessive volatility that could derail expectations and threaten inflation targets. Many Asian central banks are looking to cushion against excessive volatility.
Yvonne Man

Asks how to get from current levels to his year-end forecast of 155 for USD/JPY.
Jeff Ng

The path to 155 relies on the yen rebounding against the dollar, especially in Q4 when the dollar seasonally weakens. This requires lower energy prices to moderate inflation, allowing the Fed to stay steady or consider rate cuts later next year.
April Hong

Asks if the narrowing FDI gap suggests an inflection point for the yen's weakness.
Jeff Ng

The investment space is competitive, with demand for AI benefiting economies plugged into the supply chain. Japan, as a base in the Asia supply chain, is set to see benefits and potential flows in H2.
April Hong

Asks about the risks from the yield gap and speculative positioning for policymakers in H2.
Jeff Ng

If expectations for Fed rate hikes moderate, it could help reverse some dollar-long positioning. If the Fed turns more neutral or dovish heading into 2027, it would help the yen.
Yvonne Man

Asks about the outlook for equities vs. precious metals and macro risks for H2.
Jeff Ng

He expects equities to be supported by AI demand, including in hardware and robotics. However, event risks from the Middle East and US midterm elections will cause ample volatility.

SignalTube

markets at a glance