© Jane Foley
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Jane Foley
Senior FX Strategist at Rabobank International, UK
The yen fell to a nine-month low against the dollar dropping 0.6 percent to 81.63 per dollar on Friday. Japan's currency also lost 0.3 percent of its value against the EU common currency falling to 108.33 per euro. The yen has weakened 7 percent in the past three months, what makes the Japan's currency the worst performer among 10 key currencies.
We do expect the Yen to weaken further. We think that on the twelve month view USD/JPY will trend to 84 level and will hold around this level on a 12 to 24 month view. However, we suspect that it will not be a straight line path. We do think that on the three-month view we could see potentially dramatic pullback in USD/JPY if there are more tensions rising out of the Eurozone crisis. What we think is that the Japanese government is pressuring the Bank of Japan to take more aggressive policy measures. Whilst last year's unilateral FX intervention on 31 October suggests the Ministry of Finance may announce further interference this year if need be. We still think that the tensions resulting from the Eurozone sovereign debt crisis could knock the weaker Yen of track on the three-month view. We do believe that the policy actions will be successful weakening the Yen, but not on the straight line path. At the end of this year we expect USD/JPY to be around 83 and EUR/JPY at 111.