Recent comments from Japanese PM Abe’s advisor Hamada (widely regarded as the theorist behind Abenomics) regarding the divergence between spot USDJPY (around 120 at the time of his comments) and PPP levels (judged to be around 105) have resulted in an increasingly dispersed set of expectations for USDJPY, especially ahead of the BoJ’s 30 April meeting where the bank will update its economic outlook, notes Credit Suisse.
"Hamada’s comments do not materially impact our long-term bearish view on the JPY or on our house expectation for further BoJ easing by October. After all, merely stating the obvious is not new information for the market," CS argues.
"But the recent downdraft in JPY implied volatility, improvement in Japan’s balance of payments and lower Fed hiking expectations lead us to trim our USDJPY 3m forecast from 125 to 122. And after all, if the guru behind Abenomics is openly suggesting that USDJPY may have run far enough for now, the market may see that as a validation of the idea that upside is limited," CS projects.
"Nonetheless, we retain our 12m 127 forecast as the structural home bias of Japanese investors continues to unwind – supported by the BoJ crowding out of JGB investors and the GPIF reallocating into foreign assets – outweighing any oil and yen weakness related gains in the BoP (Onward and outward). Fed rate hikes over that time horizon will also help," CS adds.
'This content has been provided under specific arrangement with eFXnews.'
eFXnews is a financial news and information service. Articles and other information distributed in this service and published on this site are provided in general terms and do not take account of or address any individual user's position. To the extent that some of these articles include suggestions as to various possible investment strategies which users might consider, they do so in only general terms without reference to the personal factors which should determine any user's investment decisions to buy or sell a specific security or currency.
The service and the content of this site are provided and distributed on the basis of “AS IS” without warranties of any kind either, express or implied, including without limitations, warranties of title or implied warranties of merchantability or fitness for a particular purpose. eFXnews and its employees, officers, directors, agents, and licensors do not also warrant the accuracy, completeness or timeliness of the information in any of the articles and other information distributed in this service and included on this site, and eFXnews hereby disclaims any such express or implied warranties; and, you hereby acknowledge that use of the service and the content of this site is at you sole risk.
In no event shall eFXnews and its employees, officers, directors, agents, and licensors will be liable to you or any third party or anyone else for any decision made or action taken by you in your reliance on any strategy and/or advice included in any article and other information distributed in this service and published in this site.
Recommended Content
Editors’ Picks
EUR/USD edges lower toward 1.0700 post-US PCE
EUR/USD stays under modest bearish pressure but manages to hold above 1.0700 in the American session on Friday. The US Dollar (USD) gathers strength against its rivals after the stronger-than-forecast PCE inflation data, not allowing the pair to gain traction.
GBP/USD retreats to 1.2500 on renewed USD strength
GBP/USD lost its traction and turned negative on the day near 1.2500. Following the stronger-than-expected PCE inflation readings from the US, the USD stays resilient and makes it difficult for the pair to gather recovery momentum.
Gold struggles to hold above $2,350 following US inflation
Gold turned south and declined toward $2,340, erasing a large portion of its daily gains, as the USD benefited from PCE inflation data. The benchmark 10-year US yield, however, stays in negative territory and helps XAU/USD limit its losses.
Bitcoin Weekly Forecast: BTC’s next breakout could propel it to $80,000 Premium
Bitcoin’s recent price consolidation could be nearing its end as technical indicators and on-chain metrics suggest a potential upward breakout. However, this move would not be straightforward and could punish impatient investors.
Week ahead – Hawkish risk as Fed and NFP on tap, Eurozone data eyed too
Fed meets on Wednesday as US inflation stays elevated. Will Friday’s jobs report bring relief or more angst for the markets? Eurozone flash GDP and CPI numbers in focus for the Euro.