JPY: Will history repeat itself? - Nomura
|In the previous synchronised global expansion and monetary tightening in the mid-2000s JPY traded weakly, but there was short-term “global risk reduction” in Q2 2006, points out the research team at Nomura.
Key Quotes
“We may be experiencing a similar situation currently. There are notable similarities and interesting differences, but the 2006 period showed that fundamental strength in the economy likely calms financial volatility, while for JPY to change trend more reductions in positions and/or changes in the US’s FX policy stance may be necessary. A notable difference is that currently the expected expansionary fiscal policy by overseas authorities will widen monetary policy divergence further.”
“We think this will be a medium term positive for yen-crosses. At the same time, we think fiscal stimulus at this point of the cycle will increase uncertainty, leading to a bumpier path in yen-crosses, even with support from monetary policy divergence. We also note that USD stabilised after US long-term yields stabilised in Q2 2006.”
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.