Analysts at CIBC, forecast USD/JPY will reach 111 during Q1 2019 and 108 during the third quarter.
Key Quotes:
“Although the yen traditionally rallies in risk-off sessions, it has been overshadowed by USD gains over the past month during the US equities sell- off. Nevertheless, its reputation as a risk-off currency still holds when one looks at the trade-weighted gauge.”
“There are many reasons to favor the JPY from a strategic perspective. A high current account surplus underlines its net creditor status. This suggests that the likelihood of a stronger JPY is higher once capital flows move back to Japan. For now, wide spreads will dissuade Japanese asset managers from hedging USD-denominated assets due to higher costs.”
“The BoJ has begun to remove stimulus to a degree (via stealth tapering and slight adjustments to yield curve control targets) which should place some modest upward pressure over time. The Bank is becoming more constructive on its domestic inflation outlook. Although the latest inflation print of 1.2% is only half of the its 2% target, Kuroda remains constructive on wages as the labour market remains tight. This will take time of course, but the risk is skewed more towards a stronger JPY than weaker from current levels.”
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