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Strategists at Credit Suisse look for more USD strength in the second quarter. Their expected USD/JPY range is 107-114 and they are buyers on dips to the lower end.

Covid policy not a source of JPY support any more

“Japan is among the global vaccination laggards even as domestic media fret about the risk of a local ‘fourth wave’, suggesting covid risks are now potentially a JPY negative. This, together with wider rate differentials, prompts us to look for further JPY weakness in Q2 if global markets stay robust, with a USD/JPY 112.50 target.”

“Depressed inflation means changes to monetary policy announced at the 18-19 March Bank of Japan’s meeting did not shift this sentiment, as the central bank remains committed to purchasing more Topix ETFs (up to JPY12 trn annually) and unlimited amounts of JGBs as needed.”