We have revised lower our 12 month forecasts for USD/JPY from 108 to 104 - Rabobank

"While Japan does not have the best set of economic fundamentals, we would argue that it is the go-to safe haven of the FX world when conditions abruptly sour or when geo-political events hit the headlines," argue Rabobank analysts.

Key quotes

"Like Japan, Switzerland runs a current account surplus but it also has a much better budget position.  While on paper it may thus appear to be a better safe haven, the SNB maintains FX intervention as a policy tool.  This likely has the effect of re-directing safe haven demand into the JPY."

"In recent years the expanding world economy has reduced underlying demand for safe haven currencies.  Through most of this year the expectation of more cheap money from various central banks has countered the impact of bad news stemming from trade wars and growth.  Central banks have thus both shored up risk appetite and depressed FX volatility.  That said, the determination of Washington to stand firm on China suggests the task of reconciliation may be impossible when issues such as the violation of intellectual property rights, forced technology transfer and Chinese subsidies to state owned enterprises have not been bridged."

"In our view the escalation in trade tensions between the US and China is likely to cut around 0.6ppts from world growth through until 2021. This will have ramifications for risk appetite, risky assets and safe haven demand.  Consequently, we have revised lower our 12 month forecasts for USD/JPY from 108 to 104."