Analysts at Danske Bank, see the USD/JPY pair to trade sideways in the short-term and to appreciated gradually long-term.
Key Quotes:
“Concerns about the Trump administration’s protectionist agenda and the case for higher inflation in the US represent downside risks to USD/JPY. Chinese growth concerns and CNY depreciation could potentially weigh on Japan’s main growth engine – exports.”
“The range for USD/JPY has shifted upwards as the flow picture has become less JPY supportive and as 10 year US yields now effectively has settled above the 3% level. FX positioning remains stretched short JPY and given the overall fragile risk environment, we expect USD/JPY to continue to trade mostly sideways with in a 110-114.50 range in the near term with risk appetite and yields on 10Y UST as main drivers. We target 112 in 1M and 113 in 3M (previously 112).”
“Longer term, the BoJ’s monetary policy should remain supportive for USD/JPY driven by widening US-Japan yield spreads and continued outflows out of Japan. However, USD/JPY appreciation will be a very gradual process in our view. We have lifted our 12M target to 115 (previously 114), due mainly to ‘rolling the time’ but still target 114 in 6M.”
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