No important events are expected today.

The Yen remains in the zone of increased attention from Japanese authorities: its weakening has already been accompanied by official statements of readiness to react to excessive exchange rate movements. The Dollar is already close to multi-year highs against the Yen. Even without new external shocks, the risk of an official response from Tokyo limits the demand for the Dollar.

The Bank of Japan raised its interest rate to 1%, pointing out the risk of accelerating core inflation as more expensive raw materials pass through into consumer prices. For now, government measures restrain energy pressures, but the regulator allows for further tightening if inflation risks persist. The rate gap with the US remains significant, yet the Bank of Japan’s stance is no longer the same argument for a one-sided weakening of the Yen.

Support for the Dollar from Fed expectations and US yields may persist, but it is already combined with the market’s high sensitivity to the actions of Japanese authorities. In such a situation, market participants may more cautiously assess the potential for further growth of USD/JPY, especially in the event of new warnings from Tokyo. The baseline scenario allows for a decline in the pair as a reaction to the risk of official intervention and a gradual change in expectations regarding the Bank of Japan.

Recommendations: SELL 161.30, SL 161.60, TP 160.40.