JPY: Japanese economic recovery continues – Rabobank
|In recent sessions, the USD150 area has been mostly capping the upside for the currency pair. At the start of the month USD/JPY was propelled higher by a remark from the then freshly installed PM Ishiba. He remarked that the economy was not ready for further rate hikes. This could have been a clumsy mistake by a politician unused to being in the market’s central view, Rabobank’s FX analyst Jane Foley notes.
USD/JPY to be lower on a 3-to-6-month horizon
“Since then, the government has made an attempt to provide reassurances about the BoJ’s independence, although the relatively sluggishness of Japanese economic data has ensured there has been no return of October rate hike speculation. Industrial production declined by a greater than expected -3.3% m/m in August, real cash earnings at -0.6% y/y dipped back into negative territory and September consumer confidence fell below the market consensus.”
“While the move back to the USD/JPY 150 level has also been supported by USD strength this month as Fed rate cut speculation was pared back, there would appear to be concern in the market about the risk of MoF intervention should USD/JPY break convincingly above the 150 level. This would likely commence with verbal push-back from the authorities, which underscores the likelihood that Ueda will refer to the impact of exchange rates on prices next week.”
“Indeed, any perceived lack of concern by the BoJ regarding currency weakness next week would likely be the green light for another leg higher in the currency pair. That said, following this summer’s volatility we would expect Ueda to choose his words very carefully to avoid sharp moves in the JPY. We continue to expect USD/JPY to be lower on a 3-to-6-month horizon as the Japanese economic recovery continues. This assumes the BoJ will continue to hike rates next year.”
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.