Analysts at CIBC, see the Japanese yen strengthening over the long term and they forecast USD/JPY at 108 by Q2 2019 and 105 at Q4 2019.
Key Quotes:
“The risk-on rally kicking off 2019 has caused investors to pare back calls of further USDJPY downside. We can see this from movement in the options space, wherein demand for downside USDJPY puts (USD puts, JPY calls) have been reduced compared to equivalent delta calls. Digging deeper, it’s clear that portfolio flow, rather than domestic fundamentals, have been the key arbiter for the yen’s performance. Indeed, low domestic yields continue to point towards outward bound retail flow, as the rolling 12-week outflow has risen in-line with USDJPY so far this year.”
“Even the weakness in the JPY hasn’t stopped key BoJ speakers from talking up further easing measures. We interpret those comments as a reaction to external developments on the trade front and the slowing internal economic cycle. At this point, the hurdle for further easing is very high, given that the Bank already owns around 50% of the domestic JGB market and over 70% of Topix ETF’s. The 10-yr yield has yet to test the implied upper range since guidance for it was shifted last year, while domestic financial stocks have underperformed this year.”
“The JPY should remain stable for the time being, but the yen has room to rally over the longer-term. Slower macro liquidity growth, upside risk to cross-asset volatility and a sizeable current account surplus are still supportive themes to keep tabs on. That should see the yen strengthen, with USDJPY falling to 106 by the end of 2019.”
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
EUR/USD clings to daily gains above 1.0650
EUR/USD gained traction and turned positive on the day above 1.0650. The improvement seen in risk mood following the earlier flight to safety weighs on the US Dollar ahead of the weekend and helps the pair push higher.
GBP/USD recovers toward 1.2450 after UK Retail Sales data
GBP/USD reversed its direction and advanced to the 1.2450 area after touching a fresh multi-month low below 1.2400 in the Asian session. The positive shift seen in risk mood on easing fears over a deepening Iran-Israel conflict supports the pair.
Gold holds steady at around $2,380 following earlier spike
Gold stabilized near $2,380 after spiking above $2,400 with the immediate reaction to reports of Israel striking Iran. Meanwhile, the pullback seen in the US Treasury bond yields helps XAU/USD hold its ground.
Bitcoin Weekly Forecast: BTC post-halving rally could be partially priced in Premium
Bitcoin price shows no signs of directional bias while it holds above $60,000. The fourth BTC halving is partially priced in, according to Deutsche Bank’s research.
Week ahead – US GDP and BoJ decision on top of next week’s agenda
US GDP, core PCE and PMIs the next tests for the Dollar. Investors await BoJ for guidance about next rate hike. EU and UK PMIs, as well as Australian CPIs also on tap.