JPY seen lower in the near term – Danske Bank

Chief Analyst at Danske Bank Jens Sorensen expects the Japanese safe haven to depreciate further in the next months.

Key Quotes

“After having initially slumped to 101.2 in reaction to Trump's win on Wednesday, USD/JPY has rallied significantly and strengthened by 1.5% to 108.30, its highest level since June”.

“The move was driven by a reversion in risk sentiment, as investors abandoned the safe-haven yen in favour of a general US dollar rally”.

“In the short term, USD/JPY is likely to remain supported by risk appetite and expectations of a Fed rate hike in December”.

“Besides monetary policy, the US reflation theme, which has supported the case for higher yields in US treasuries, is also a positive factor for USD/JPY. Historically, the correlation between USD/JPY and 10Y US yields has been high and positive”.

“In addition, higher commodity prices, in particular higher oil prices, will be a negative for the Japanese current account and thus JPY negative over the medium term”.

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