Forex Flash: UBS raise its USD/JPY forecast to 85.00 in 1 month and 88.00 in 3 months (San Francisco) - The USD/JPY is trading at daily highs at 84.40 after recovering from 84.25. The Yen is reaching its third positive day in a row with the pair consolidating levels from yesterday's and 8-month high at 84.60.

The UBS' team expects the USD/JPY extending its advance to early May highs in 1 month and they are comfortable with their 88.00 target in 3-month forecast. UBS expects the return of Abe as "substantial pressure on the Bank of Japan to ease policy further in the near term."

The UBS Economics expects "the central bank to raise its quantitative easing Asset Purchase Programme again at this week’s upcoming board meeting." The new governor, that is expected to take the power in April, "are likely to significantly increase domestic JGB purchases, and may eventually consider formally targeting the yen or buying foreign bonds if the new government changes the BoJ law."

In this line, UBS raise its "one and three month USDJPY forecasts from 80 and 85 respectively to 85 and 88 with a risk that the pair trades as high as 90 over the next few months."