USD/JPY to trade at 145 in the end of the year – Rabobank
|US President Trump is clearly far too busy to be an avid BoJ watcher. His comments that Japan and China are putting the US at an unfair disadvantage when they weaken their currencies suggests he may have missed the fact that the rounds of intervention implemented by the MoF since 2022 have been aimed at strengthening the JPY, Rabobank's FX analyst Jane Foley notes.
Downside risk to persist to the end of the year
"That said, Trump has a point because the JPY is undervalued against the USD, and indeed against most other G10 currencies, on many measures. The last few years saw a keen interest in the JPY carry trade as widened interest rate differentials drove speculators into short JPY positions vs the USD. This, however, has been changing. The BoJ is currently the only G10 central bank maintaining a tightening policy bias and, in reflection of this, the JPY is the best performing G10 currency in the year to date."
"Recently, a round of better-than-expected Japanese economic data has spurred the view that BoJ policy makers are preparing the ground for another rate hike, potentially around the middle of the year. This has fuelled interest in the JPY. The problem, however, is that this trade has become crowded. In a sharp reversal from last year’s holdings of net short JPY positions, latest CFTC speculators’ data suggest that the level of net JPY longs has reached the highest level ever."
"In these circumstances, a round of profit-taking wouldn’t be surprising as the market awaits fresh incentive to renew its JPY longs. The JPY rally did stutter in the last few sessions. However, it would appear that Trump’s comments have provided the incentive to renew interest in JPY longs. We maintain a year end forecast of USD/JPY145, with downside risk."
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.