Land of the rising sun still shining

For the past year, the U.S. Fed and Bank of Canada (BoC) had been increasingly hawkish, while the Bank of Japan (BoJ) was on this trend, too, but much more tepidly. Today, it appears the Bank of Canada and Fed are done hiking. If we had to guess who cuts first, we believe it would be the Bank of Canada (or should be). Meanwhile, in Japan, the more tepid moves from dove to hawk continue, albeit slowly. Put it all together, the direction of the relative hawk/dove tilt between the Fed/BoC vs BoJ should support the yen going forward. Or the historically high rate differential between Japan and the U.S. or Canada should narrow or at least not widen anymore. The wildcard is if or when the BoJ relaxes yield curve control; this could result in a rapid rise of the yen.

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