Citigroup strategists recommend positioning for stronger dollar/yen after sharp moves

LONDON, July 30 (Reuters) - Citigroup FX strategists on Thursday recommended buying a dollar-yen call spread, an options trade that positions for a rebound in dollar-yen, before a Bank of Japan rate decision and follows heavy selling in the currency pair earlier in the day.

"We do not think Governor (Kazuo) Ueda will be able to 'outhawk' expectations at tonight's BoJ meeting, which could lead to a disappointment (and may even be the incentive for getting dollar-yen lower ahead of the event)," said Citigroup senior FX and macro strategist Daniel Tobon in a note.

"We see scope for a bounce back in dollar-yen tonight with upside follow through after."

The yen surged on Thursday in a move analysts said bore the hallmarks of official intervention by Tokyo to prop up the currency. The dollar was last down 2.5% against the yen JPY=EBS at 159.40.

Tobon said Citi recommend buying the one-month dollar-yen 160.50/162 call spread, an options trade that would profit from a recovery in the currency pair above 160.50, with maximum gains reached at 162.

The Bank of Japan is likely to keep rates steady on Friday.

(Reporting by Samuel Indyk; editing by Dhara Ranasinghe)

((Samuel.Indyk@thomsonreuters.com))