Analysts at MUFG Bank, point out that with the Federal Reserve having addressed USD liquidity issues, they see the path opening up for USD/JPY to grind back lower over the coming weeks.
“The huge demand for US dollars even overwhelmed the usual favoured safe-haven currency, the yen, which resulted in USD/JPY going higher during the extreme risk off period. But we have had evidence this week to suggest this has been addressed. The JPY cross-currency basis has jumped this week from the low-point on 19th March to revert to more normal levels. That followed a USD take-up at the BoJ dollar supplying operation of USD 67.2bn. But we cannot downplay the scale of Fed actions and we believe those actions will play out most clearly in USD/JPY – and hence we see further downside risks for USD/JPY.”
“Cheap hedging costs could see greater hedging by GPIF also while, we would only see notable GPIF support at lower USD/JPY levels. With the Fed having addressed USD liquidity issues, we see the path opening up for USD/JPY to grind back lower over the coming weeks.”
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.