USD/JPY could drop to 105.00 on a 3M view – Rabobank

In view of its safe-haven status, movements in the Japanese Yen often appear more focused on events outside its border than domestic news, point out Rabobank analysts. They see risks in USD/JPY tilted to the downside. 

Key Quotes: 

“The two oil linked currencies have taken the lead over the safe havens for now. While the NOK and CAD can be expected to continue taking their cue from the outlook for oil prices this week, the safe havens JPY and CHF will be more focused on the geopolitical implications of the Saudi attack.”

“Decisions taken by the Trump Administration is relation to trade with China and with respect to Iran are likely to have significant implications for safe have assets which could either support or counter the BoJ’s policy objectives.”

“In spite of periodic bouts of safe haven demand for the JPY, the fact that Japan’s effective exchange rate is still trading only modestly above multi-decade lows does imply that the BoJ’s extremely lose policy conditions has had an impact on softening domestic monetary conditions. That said, in recent months USD/JPY has been biased lower mirroring a reduced level of risk appetite.”

“Given the current geopolitical risks in addition to the slowdown in world growth, we see risk that USD/JPY could be headed towards the 105.00 area on a 3 month view.”