Morten Helt, Senior Analyst at Danske Bank, still expects the JPY to continue suffering in an environment with rising global bond yields and a higher oil price.
“As the Fed is slightly underpriced, in our view, we see relative rates providing moderate upside potential for the cross in the near term. However, as short yen positioning is very stretched, additional yen weakening is likely to unfold gradually and the stretched positioning warrants a larger USD/JPY downside risk and higher sensitivity to investors’ risk appetite. Hence, especially ahead of the French presidential elections, we see little potential for a USD/JPY rally. We target 114 in 1M(116) and 115 in 3M(118).”
“Longer term, we still target USD/JPY at 118 in 6-12M, as we expect portfolio outflows out of Japan to counter the underlying appreciation pressure on JPY stemming from fundamentals.”