The Bank of Japan met last week and they have kept up with their ultra-loose monetary policy. There had been some speculation heading into the BoJ meeting that the bank may need to flag up to markets that they were increasingly concerned about a weak JPY. However, BoJ’s Governor Kuroda said that the BoJ have no need/right to affect FX rates. Also, the inflation pressures in Japan were seen as being gradual and the BoJ will keep the Japanese 10-year bond at 0%.

This should mean the JPY can continue to weaken further against the AUD and the NZD.

The New Zealand dollar

The RBNZ is on course to raise interest rates up to a projected terminal rate of 3.3%. This means the RBNZ is now on a hiking cycle to control inflation and subdue a hot housing market which should result in medium-term NZD strength. The prospect of New Zealand opening its borders from next month is a good indication that the world is opening up again and that should also provide a further boost for the NZD

Will the NZDJPY pair be able to break through this key weekly resistance level?

Major Trade Risks: Risk-off markets would typically result in NZDJPY weakness, but that pattern has been broken a little recently due to the unique market dynamics. However, this risk does remain should market conditions alter.