During July the yen strengthened notably versus the US dollar from 107.78 to 105.67. However, the yen weakened against the euro from 121.22 to 124.89. Low-beta yen has resulted in sharper USD depreciation versus other G10 currencies than versus the yen. Long-term, economists at MUFG Bank believe USD/JPY could trade below the 100.00 level.
“The negative correlation between USD and equity markets has resulted in sharper USD depreciation versus other G10 currencies than versus the yen. Eventually though catch-up is likely and that means continued downward pressure on USD/JPY reflecting broader conditions.”
“We have had a long-term view of gradual JPY appreciation. The aggressiveness of the COVID policy response has helped curtail JPY gains but the general global backdrop is consistent with JPY strength and eventual levels for USD/JPY below the 100 level are possible going forward.”