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12 Dec 2014
USD/JPY may keep pushing higher in 2015 – Rabobank
FXStreet (Barcelona) - Jane Foley, Senior Currency Strategist at Rabobank, notes that the economic difficulties in Japan combined with USD strength will keep pushing USD/JPY higher during the course of 2015, while forecasting 125 levels for the pair in 12 months.
Key Quotes
“The Japanese economy contracted by an annualised -1.9% q/q in Q3, bogged down by weak consumption spending and a fall in business spending. Against this backdrop the BoJ’s 2.0% inflation target looks increasingly difficult to obtain. Although the weaker yen should provide a boost to import prices, the lack of real wage growth in Japan suggests that the prospects for a strengthening in demand led inflation are bleak.”
“Against this backdrop the attraction of providing a boost to the external sector via the currency must be attractive. On the back of the BoJ’s monetary easing Japan’s effective exchange rate has weakened by more than any other in the developed world since the start of last year.”
“The weakness of the yen, however, is not good news for everyone. It is possibly a factor behind’s the decision by the PBoC to cut rates last month. We also ascribe much of the step up in jawboning from the RBA about the level of the AUD to the move higher in AUD/JPY. That said, in view of the economic difficulties facing Japan, we have not ruled out the possibility of further policy action from the BoJ and expect that USD/JPY can continue to push higher during the course of 2015, facilitated by the bull trend in the USD and the market’s expectations that the Federal Reserve is preparing the ground for a hike in the Fed funds rate. We maintain a 12 mth target of USD/JPY125.00 and see scope for EUR/JPY to move towards 150 by the middle of next year.”
Key Quotes
“The Japanese economy contracted by an annualised -1.9% q/q in Q3, bogged down by weak consumption spending and a fall in business spending. Against this backdrop the BoJ’s 2.0% inflation target looks increasingly difficult to obtain. Although the weaker yen should provide a boost to import prices, the lack of real wage growth in Japan suggests that the prospects for a strengthening in demand led inflation are bleak.”
“Against this backdrop the attraction of providing a boost to the external sector via the currency must be attractive. On the back of the BoJ’s monetary easing Japan’s effective exchange rate has weakened by more than any other in the developed world since the start of last year.”
“The weakness of the yen, however, is not good news for everyone. It is possibly a factor behind’s the decision by the PBoC to cut rates last month. We also ascribe much of the step up in jawboning from the RBA about the level of the AUD to the move higher in AUD/JPY. That said, in view of the economic difficulties facing Japan, we have not ruled out the possibility of further policy action from the BoJ and expect that USD/JPY can continue to push higher during the course of 2015, facilitated by the bull trend in the USD and the market’s expectations that the Federal Reserve is preparing the ground for a hike in the Fed funds rate. We maintain a 12 mth target of USD/JPY125.00 and see scope for EUR/JPY to move towards 150 by the middle of next year.”