21 Jan 2015
USD/JPY in focus, downside favoured - ANZ
FXStreet (Guatemala) - Analysts at ANZ Bank explained that a main influence on currencies has been the USD/JPY.
"In recent months we have argued that Japan’s easing steps haven’t been particularly successful at generating the sort of domestic broad money expansion which one might expect to reflect genuinely stimulatory monetary policy."
"This suggests that we should expect BoJ easing to have currency effects which are largely one-off, or step-like, rather than effects which are ongoing. Certainly the circumstantial evidence is supportive of such a view, with the yen’s response to the BoJ’s two easing steps looking remarkably similar."
"There is also an important macro reason behind the BoJ’s latest easing move only having a step impact on the USD/JPY, and that is the broader risk
environment."
"A key tenet of most strong USD views is the imbalanced global economy. Such a view, however, does not really equate with a strong risk-on sort of
environment. Yet such an environment seems to be presupposed in the strong USD/JPY view."
The upshot is that USD/JPY consolidation in the 115-120 range seems likely to persist, with the risk environment suggesting that the near-term risks favour the downside rather than the upside.
"In recent months we have argued that Japan’s easing steps haven’t been particularly successful at generating the sort of domestic broad money expansion which one might expect to reflect genuinely stimulatory monetary policy."
"This suggests that we should expect BoJ easing to have currency effects which are largely one-off, or step-like, rather than effects which are ongoing. Certainly the circumstantial evidence is supportive of such a view, with the yen’s response to the BoJ’s two easing steps looking remarkably similar."
"There is also an important macro reason behind the BoJ’s latest easing move only having a step impact on the USD/JPY, and that is the broader risk
environment."
"A key tenet of most strong USD views is the imbalanced global economy. Such a view, however, does not really equate with a strong risk-on sort of
environment. Yet such an environment seems to be presupposed in the strong USD/JPY view."
The upshot is that USD/JPY consolidation in the 115-120 range seems likely to persist, with the risk environment suggesting that the near-term risks favour the downside rather than the upside.