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The Japanese yen  attracts safe-haven flows but it has to compete with the US Dollar. What’s next?

Here is their view, courtesy of eFXdata:

CIBC Research discusses the JPY outlook and maintains a medium-term bullish bias into 2019, expecting USD/JPY to fall below 110 early next year.

“We underlined last month (see here) three key reasons why we remain constructive on the JPY outlook: Japan’s large current account surplus, its net-creditor status, and the BoJ’s stealth tapering. All of these represent a land of the rising sun for the yen in terms of a medium-term appreciation ahead.

The recent uptick in risk aversion could also see domestic investors stay within Japan in order to earn a return. Speculative JPY shorts have reached eight-month highs, suggesting that there is scope for a short covering rally, which would lend further support to the yen,” CIBC argues.

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