Chris Turner, Global Head of Strategy at ING, suggests that the USD/JPY has a window to 120, helped by Trump announcing US tax holiday while the Trump’s protectionism or US weak dollar rhetoric are the risk, but fundamentals are $/JPY positive.
Key Quotes
“Both the Fed (informally) and the BoJ (formally) are now prepared to experiment with inflation above target. Real yield divergence will now be key.”
“On the one hand, Trump’s reflationary policies and the Fed’s tightening profile look set to drive UST yields higher throughout 2017. By contrast, the BoJ’s comprehensive assessment of its own QQE policy, published in September, formally introduced ‘Yield Curve Control’ (YCC) to pin 10-year JGB yields at 0% until further notice. Despite having a JGB yield target, the BoJ also currently estimates that it will take JPY80trn of annual JGB buying to achieve said target. Presumably that pace of purchases will accelerate into a bond bear market in 2017 – triggering more aggressive BoJ balance sheet expansion.”
“In addition, the BoJ’s increasing ownership of the JGB market may prompt speculation over the need for helicopter money next summer. The BoJ is seen as being the first in the queue to employ this tactic, not only because of Japan’s already huge debt to GDP ratio, but also the adventurous track record of Kuroda’s BoJ.”
“This should prove quite negative for JPY through the real rate channel. A rise in inflation expectations at a time when nominal rates, both at the long and the short end, are locked at the floor stands to weaken real interest rates and the JPY.”
“Declining real interest rates in Japan should also encourage a further search for yield from Japanese investors. With domestic incomes rising, we are already witnessing greater interest in FX-linked investment products. This has been particularly true for USD denominated Toushin investment trust products. And our view is that this Japanese confidence in overseas FX assets broadens and extends through 2017.”
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. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
Australian GDP expands 0.2% QoQ in Q3 vs. 0.4% expected
Australia’s Gross Domestic Product rose 0.2% in the third quarter of 2023 compared with the 0.4% growth in Q2, the Australian Bureau of Statistics showed on Wednesday. This reading came in below expectations of 0.4%. Following the data, the AUD/USD is up on the day to trade at 0.6565.
EUR/USD consolidates at three-week lows near 1.0800 Premium
EUR/USD bottomed at 1.0775, the lowest level since November 15, and then rebounded towards 1.0800. The US Dollar remains resilient in the market despite lower yields and mixed US data. On Wednesday, more job figures are due with the ADP report and Unit Labor Costs data, ahead of Friday's NFP.
Gold drops to $2,020, eyed on US ADP data
Gold loses momentum during the early Asian session on Wednesday. The renewed US Dollar demand drag the yellow metal lower. Meanwhile, the US Dollar Index rebounds to 104.00. The XAU/USD price trades near $2020, up 0.01% for the day.
Bitcoin price hits $44,000 as Coinbase CEO speculates BTC could be key to extending Western civilization
Bitcoin price has revisited levels last seen in April 2022, prior to the collapse of the Terra UST ecosystem. Its foray above the $42,000 psychological level has market watchers enthused, so much so that there are now hyped-up predictions about further gains.
US markets traded in a mixed-bag fashion
US markets traded in a mixed-bag fashion, but the tone of the S&P 500 was rather moody, with losers outpacing winners by a wide margin, all as markets digest a stronger-than-expected November ISM Non-manufacturing survey offset by an unexpected significant decline in October job openings.