What is the forecast for USD/JPY?
Here is their view, courtesy of eFXdata:
MUFG Research notes that while Japanese hedged flows will dominate, opportunistic unhedged flows will provide USD/JPY support at lower levels going forward.
“Two things in relation to Japan’s bilateral flows to the US. Firstly, flows going forward are likely to be more on a hedged basis than before the COVID crisis. Secondly, unhedged flows will be very much influenced by USD/JPY,” MUFG notes.
“Last week is probably example of Japanese investors’ sensitivity to USD/JPY levels and greater buying of UST bonds on dips in USD/JPY is likely to continue. That was seen when COVID first hit and USD/JPY plunged in early March and we suspect weekly crossborder flows next week covering this week will confirm increased foreign bond buying,” MUFG adds.