A late bout of FX volatility could arrive this afternoon after the Bank of Japan meeting

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Around 1pm AEST today the Bank of Japan (BOJ) will announce its June monetary policy decision with the market near-unilateral in thinking that policy will be left unchanged.

While almost everyone believes the bank will continue to expand its monetary base by around 80 trillion yen per annum at the conclusion of its meeting, according to analysts at ANZ, there will be plenty of interest in governor Haruhiko Kuroda’s post-meeting press conference, scheduled for 4.30pm Sydney time.

Here’s ANZ on why Kuroda’s views is likely to be the focus of FX markets this afternoon.

“Governor Kuroda’s post statement press conference could be interesting in the wake of his remarks about the Japanese currency to the Diet this week and last. Last week, he said it was unlikely that the real effective Japanese exchange rate (REER) would weaken further. Many interpreted this as a sign that the BoJ was happy with level of JPY and thus scaled back expectations of further easing.

Kuroda attempted to rectify this ‘misinterpretation’ when he spoke to the Diet again on 16 June. In particular, he said his comments on the REER had no bearing on implications for the nominal value of the JPY. This value should continue to reflect prospective monetary policy differentials and other key fundamental drivers. We would expect more of the same from Kuroda at the press conference.”

Given volatility that has accompanied remarks from Kuroda in recent weeks, along with the timing of his press conference – European markets will be in full swing with volume at its highest level of the session – there could be significant moves in both the yen and US dollar index later in today’s session.

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