JPY and the BOJ on watch
BOJ policy guidance and the JPY.
Group Research - Econs, Chang Wei Liang18 Sep 2026
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USD/JPY has inched back to 156 ahead of the BOJ meeting today, with markets expecting a 25bps rate hike. Markets have also priced in a second hike in Dec and a third hike by April next year, so policy guidance that is not quite as hawkish could see a resumption of JPY selling pressures. Given that the BOJ is hiking from a position of deeply negative real rates, and with inflation pressures in the pipeline due to energy shocks, it would be quite a surprise if Governor Ueda does not reinforce a vigilant stance and signal the possibility of more near-term hikes. We are thus holding a positive view on the JPY.

USD/CNH has been easing gradually towards 6.70 in defiance of a stronger USD. The stronger RMB is supported by a steady decline in the USD/CNY fixing to below 6.76 yesterday, which is perhaps a goodwill gesture from China ahead of the Trump-Xi summit in Washington next week. The US is also reportedly holding back a planned announcement of new tariffs related to alleged excess manufacturing capacity, at least until next week’s summit. With the leaders set to discuss wide-ranging issues related to trade, Iran and AI, markets could hope for an extension of the US-China trade truce beyond November. We expect RMB to strengthen further into the Trump-Xi summit next Thursday.

Oil prices are easing a tad following reports that China has requested Iran to help rein in Houthi attacks on behalf of the Saudis.  Saudi Arabia is now restoring its East-West pipeline to the Red Sea coast after damage from attacks and aims to return to half of its capacity. Elevated uncertainty over Middle East geopolitics and oil prices could keep central banks leaning towards the hawkish side, while oil-sensitive currencies including INR, IDR, and THB are weighed.

Chang Wei Liang

FX & Credit Strategist
weiliangchang@dbs.com




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