The Japanese Yen (JPY) is outperforming all G10 currencies, rising 0.6% against the US Dollar (USD) as markets interpret Governor Ueda’s latest remarks as a hawkish shift. Traders now price in roughly 21bps of tightening at the December 19 BoJ meeting, a sharp increase from last week’s expectations, Scotiabank's Chief FX Strategists Shaun Osborne and Eric Theoret report.

JPY outperforms entire G10 ahead of December BoJ Meeting

"The JPY is up an impressive 0.6% vs. the USD and is outperforming all of the G10 currencies as we head into Monday’s NA session, rallying on the back of a hawkish interpretation of comments from BoJ Governor Ueda."

"Markets have repriced their expectations for a December hike on the back of Gov. Ueda’s latest comments in which he stated that the BoJ would ‘consider the pros and cons of raising the policy rate’."

"Short-term rates markets now have a December hike priced at 21bpts, a significant increase from the single-digit levels seen as recently as last week. The 2Y US-Japan spread has pushed to a fresh low, offering the yen fundamental support. The BoJ’s next meeting is scheduled for December 19."