26 Jun 2014
JPY: Weak or strong? - Rabobank
FXStreet (Guatemala) - Jane Foley, Senior Currency Strategist at Rabobank explained the market consensus continues to call for a firmer tone in USD/JPY through this year and next.
Key Quotes:
“Despite this expectation, USD/JPY is stubbornly positioned well below its January high. While this would imply that that the market must be disappointed by the yen’s resilience, this view may not be as pronounced at it would appear. Much of the failure of USD/JPY to push higher can be explained by the persistent weakness of the USD”.
“Even though the yen has climbed over 3% vs. the USD since the start of this year it is still the case that measured on a 12 mth view it currently holds the mantle of the worst performing developed world currency”.
“We have argued many times before that a stronger USD would facilitate a move higher in USD/JPY. Clearly, however, a USD recovery is proving to be far more evasive than the market had expected”.
“The continued wave of dovish sentiments that are flowing from the Fed are ensuring that the USD retains a weakened position. In this environment it will remain difficult for USD/JPY to make upside progress almost irrespective of policy actions taken in Japan”.
“Another factor that is inhibiting the yen from softening is the current wave of geo-political tension”.
“Some moves into safe haven assets have been perceptible at times this year, this could make it all the more difficult for the yen to give up ground at the present time”.
“In recent months the more upbeat tone of the BoJ has forced the consensus to pare back expectations of further QE announcement this year. This too has helped support the yen”.
“However, the BoJ is continuing with a huge amount of stimulus every month with no hint of tapering. Consequently there is still a bearish yen argument”.
“As the Fed pares back its QE and gradually edges towards its first rate hike, the accommodative position of the BoJ will, on a relative basis, become even more pronounced. We expect USD/JPY to hold around current levels near term, but see scope for a move towards 107 early next year”.
Key Quotes:
“Despite this expectation, USD/JPY is stubbornly positioned well below its January high. While this would imply that that the market must be disappointed by the yen’s resilience, this view may not be as pronounced at it would appear. Much of the failure of USD/JPY to push higher can be explained by the persistent weakness of the USD”.
“Even though the yen has climbed over 3% vs. the USD since the start of this year it is still the case that measured on a 12 mth view it currently holds the mantle of the worst performing developed world currency”.
“We have argued many times before that a stronger USD would facilitate a move higher in USD/JPY. Clearly, however, a USD recovery is proving to be far more evasive than the market had expected”.
“The continued wave of dovish sentiments that are flowing from the Fed are ensuring that the USD retains a weakened position. In this environment it will remain difficult for USD/JPY to make upside progress almost irrespective of policy actions taken in Japan”.
“Another factor that is inhibiting the yen from softening is the current wave of geo-political tension”.
“Some moves into safe haven assets have been perceptible at times this year, this could make it all the more difficult for the yen to give up ground at the present time”.
“In recent months the more upbeat tone of the BoJ has forced the consensus to pare back expectations of further QE announcement this year. This too has helped support the yen”.
“However, the BoJ is continuing with a huge amount of stimulus every month with no hint of tapering. Consequently there is still a bearish yen argument”.
“As the Fed pares back its QE and gradually edges towards its first rate hike, the accommodative position of the BoJ will, on a relative basis, become even more pronounced. We expect USD/JPY to hold around current levels near term, but see scope for a move towards 107 early next year”.