17 Jul 2014
JPY still biased to the downside in a longer-term – Rabobank
FXStreet (Edinburgh) - In the opinion of Jane Foley, Senior Currency Strategist at Rabobank, the Japanese currency would head lower towards year-end, boosting spot to the area of 107.00.
Key Quotes
“The JPY has long since been associated with safe haven flows and these will from time to time offer direction”.
“That said, we would argue that the inability of USD/JPY to head higher this year is primarily a function of USD weakness”.
“We anticipate that by the turn of the year a firmer tone should be creeping back into the USD and this should remove one hurdle to a firmer USD/JPY”.
“Right now, the JPY is also been supported by changing views related to BoJ policy. Not so long ago the market was fairly confident that the BoJ would step up its huge stimulus programme in the wake of the April consumer tax hike. The Bank, however, has maintained an upbeat outlook. After its 2 day policy meeting at the start of this week, Governor Kuroda commented that a ‘virtuous cycle’ is continuing to work in Japan’s economy”.
“While some investors may be disappointed about the lack of will of the BoJ to ease further it must be remembered that the BoJ is already throwing a huge amount of stimulus at the market with the aim of increasing the monetary base by no less than Y60-Y70 bln a year”.
“There are no signs of the BoJ winding down its asset purchases meaning that on a relative basis the BoJ is increasingly appearing more generous as Fed tapering progresses. This suggests that there is good reason to expect USD/JPY to head higher medium-term”.
“That said, the slow pace of USD appreciation, the re-pricing of expectations about additional BoJ easing and our view that Japanese investors will become less enamoured by the AUD and the NZD in the months ahead could pressure USD/JPY a little lower near-term and could contain upside potential in the coming 12 mths”.
“We have revised lower our 12 mth USD/JPY forecast to 107.00 from 110.00. Near-term, there is risk of further downside for EUR/JPY, support at 136.25 February low”.
Key Quotes
“The JPY has long since been associated with safe haven flows and these will from time to time offer direction”.
“That said, we would argue that the inability of USD/JPY to head higher this year is primarily a function of USD weakness”.
“We anticipate that by the turn of the year a firmer tone should be creeping back into the USD and this should remove one hurdle to a firmer USD/JPY”.
“Right now, the JPY is also been supported by changing views related to BoJ policy. Not so long ago the market was fairly confident that the BoJ would step up its huge stimulus programme in the wake of the April consumer tax hike. The Bank, however, has maintained an upbeat outlook. After its 2 day policy meeting at the start of this week, Governor Kuroda commented that a ‘virtuous cycle’ is continuing to work in Japan’s economy”.
“While some investors may be disappointed about the lack of will of the BoJ to ease further it must be remembered that the BoJ is already throwing a huge amount of stimulus at the market with the aim of increasing the monetary base by no less than Y60-Y70 bln a year”.
“There are no signs of the BoJ winding down its asset purchases meaning that on a relative basis the BoJ is increasingly appearing more generous as Fed tapering progresses. This suggests that there is good reason to expect USD/JPY to head higher medium-term”.
“That said, the slow pace of USD appreciation, the re-pricing of expectations about additional BoJ easing and our view that Japanese investors will become less enamoured by the AUD and the NZD in the months ahead could pressure USD/JPY a little lower near-term and could contain upside potential in the coming 12 mths”.
“We have revised lower our 12 mth USD/JPY forecast to 107.00 from 110.00. Near-term, there is risk of further downside for EUR/JPY, support at 136.25 February low”.