Jane Foley, Senior Currency Strategist at Rabobank, believes there is a risk that the USD/JPY drop to 107 on a one-month outlook before returning to firmer levels by the end of the year.
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“Although the safe-haven JPY is the worst performing G10 currency so far this year, it is the best performing currency on a 5-day perspective as Covid-related news in the Asian region destabilizes the appetite for risk. “
“Last month’s monetary policy review has given the BoJ a bit more flexibility in its activities. There appears to be little risk that the authorities will not continue to apply ultra-accommodative policy measures in the foreseeable future.”
“Despite current optimism about the prospects for economic recovery in the euro zone, the UK and the US, it is clear that the good news is not spreading evenly. We continue to see the risk of a re-emergence of Concerns about the inflation outlook in the United States will improve the outlook for the US dollar in the coming months and we maintain our expectation of choppy conditions in the major currencies. That said, based on the current news flow from Asia, we have revised higher our safe-haven JPY forecasts. We see the risk that USD / JPY will fall to 107 on a 1-month view before returning to firmer levels later in the year. “
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