USD/JPY seen at 102.00 in 3-month – Danske Bank

Morten Helt, Senior Analyst at Danske Bank, now sees the pair appreciating at a slower pace, likely to test the 102.00 area in a 3-month view.

Key Quotes

“The upcoming BoJ meeting on 21 September, when the BoJ will present a comprehensive assessment of its monetary policy strategy, will in our view prove pivotal for the medium-term outlook for the yen”.

“We no longer expect the BoJ to cut interest rates further which for the FX market implies less potential for JPY depreciation over the medium and long term, and we have consequently lowered our 3-12M USD/JPY forecast”.

“However, given the market’s low expectations for further BoJ rate cuts, short-term valuations and positioning, we expect that JPY appreciation pressure to lose momentum, and in the absence of sharp deterioration in risk sentiment and/or substantial declines in crude oil prices, we do not expect USD/JPY to break below significantly 100”.

“On a 3-12M horizon, we do not see any strong case for a trend in USD/JPY. On the one side, the prospect of a monetary policy surprise (either from the BoJ or the Fed) is low, and while the underlying support for JPY stemming from fundamental flows is likely to remain intact, we see the effects diminishing as the yen no longer is undervalued. We target USD/JPY at 102 (107) in 3M and 104 (108) in 6-12M”.