[MARKET ANALYSIS] JPY sinks post-BoJ which saw two dissenters, and Ueda strike a dovish tone; USD steady

Snapshot: G10s are mixed against the USD; the Aussie slightly outperforms, whilst the JPY is the clear laggard following the BoJ’s policy announcement. DXY is mildly firmer this morning and currently holds within a fairly narrow 100.19-34 range. The index still remains towards post-FOMC highs, benefiting from higher energy prices and as markets pull forward their calls for further hikes this year. The JPY is the clear underperformer this morning, after the BoJ decided to lift rates by 25bps (as expected), with the decision made by a 7-2 vote split. The two dissenters were PM Takaichi “reflationist” members; Asada noted that the economy was not strong enough, whilst Sato believed that price developments had not substantially accelerated. The announcement itself spurred immediate pressure in the JPY, given the two surprise dissenters and after the BoJ avoided any guidance surrounding a faster pace of rate hikes. Governor Ueda’s presser thereafter saw Ueda also strike a dovish tone, where he highlighted that easy monetary conditions are expected to be maintained, adding that rates have tightened, but bank lending and asset markets remain accommodative. USD/JPY is stronger by c. 1.1% on the session so far, and currently holding at the upper end of a 155.87-157.77 range. No doubt, if the theme of widening differentials between the Fed and BoJ returns, USD/JPY will likely head back towards 158-160 range. EUR is mildly firmer this morning, amidst a slew of ECB speak, where a number of members are in currently in Ireland for an informal meeting of EU ministers. ECB’s Kaasik and Kazaks struck a hawkish tone, with the latter suggesting that a September hike is unlikely to be the last, “unless we find ourselves in a very different scenario than the baseline”. Elsewhere, President Lagarde reiterated that they are not seeing second-round effects. A recent Bloomberg survey showed that economists believe that the Bank will wait until December before delivering a final interest-rate increase to quell inflation triggered by conflict in the Middle East.