President Trump and implications for yen – Deutsche Bank

Taisuke Tanaka, Strategist at Deutsche Bank, suggests that the USD/JPY plummeted at first as chances of a Trump victory grew, but Deutsche Bank expects a turnaround as the markets coolly consider economic policy and interest rate trends.

Key Quotes

“The most worrisome risk was that the USD/JPY would slide below 100 in the initial shock. If it were to drop deeply into the 90s, a technical rebound to 100 might have been challenging.

For now, the USD/JPY remains at the 100 level. However, the results of Trump's economic policy will not become clear until at least 2018. We expect him to move to ensure a boost in the economy in 2019-20 in hopes of reelection after his four-year term. If that view is true, the markets; concerns on a peaking in the US economic cycle in 2017 would likely send the USD/JPY to the 90s. Also there is concern on Trump’s intolerant stance to the yen weakness. However, the downward risk to the USD/JPY should also be limited depending on the steadiness of the US economy to be supported by Trump’s policy in 2019-20.”