Bank of America Merrill Lynch FX Strategy Research notes that the BoJ is widely expected to leave its policy unchanged, and the FX market is likely to focus on external issues.
However, BofAML argues that the one thing to watch is the potential removal of the ¥80tn language in the statement.
"In our view, such a removal is unlikely to impact the JPY much if it is accompanied by the BoJ's explanation that it is not a signal for policy tightening. " BofAML adds.
Therefore, BofAML argues that a sheer removal of the ¥80tn language on the bond buying program in the policy statement is unlikely to move the JPY much beyond a potential knee-jerk strength.
As such, BofAML still holds the view that selling JPY is a better risk-reward trade especially vs the EUR.
Source: Bloomberg
Trader Bozhidar Arabadhiev
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