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The Japanese yen and the US dollar are both safe-havens assets. Economists at Rabobank see a battle between these two currencies with the JPY outpacing the gains in the USD amid a fall in risk appetite. They expect the USD/JPY trading around the 105 zone in the coming months.

Key quotes

“From fears about the impact of a second wave of covid-19, to worries about the disappointing pace of fiscal stimulus in the US there are plenty of economic factors to concern investors. Added to this are fears about possible disruption from the US election in addition to various geo-political factors.”

“On any sharp fall in risk appetite in the coming months, we expect that the JPY is the only other currency which could keep up or outpace the gains in the USD. Which currency is the better performer may be a function of the type of news that is undermining investor confidence.”

“The JPY can be very sensitive to geopolitical risk, particularly in the Asian region. There are currently plenty of headlines related to China and the reactions of other regional countries to its activities in the S. China Sea, E. China Sea and Taiwan Straits. Activity along China’s land border with India and have also been a concern. Our central view is that USD/JPY will be holding around the 105 area in the months ahead, though any further rise in tensions on this front could push USD/JPY lower.”