Khoon Goh, Senior FX Strategist at ANZ, on the Japanese Yen

Source: Dukascopy Bank
© ANZ
I believe that the size of the additional asset purchase programme is not large enough to nearly cause depreciation of the Yen. We are now observing the period of a broad US Dollar weakness, which is more important than what either the Bank of Japan or other central banks might decide to do with their policy. What we have seen in recent weeks is that the Bank of New Zealand tried to push the currency down, the Reserve Bank of Australia has been signaling that they are going to cut the interest rates tomorrow, whereas the Bank of Japan is looking to expand the asset purchase programme. Therefore, all the respective currencies have appreciated. I think this goes for sure that the broad US Dollar trend is more important than what policymakers decide to do.

I think with regard to the Yen we have seen quite a substantial increase in USD/JPY from March to April. What we are seeing now is the reversal in rebounding of USD/JPY. At that stage a lot of market participants thought the USD/JPY could go a lot higher and actually the market has expected USD/JPY growth, but a lot of people were anticipating the Yen depreciation. I think the BOJ will continue to pursue the monetary easing, which signals that the interest rates are going to stay low for a long time. I think the US Dollar will come down as a result. It has been already reflected in USD/JPY with the Yen strengthening.

For the end of this quarter we forecast USD/JPY to be at 77. In the near term we can see the further downside pressure on USD/JPY. The pair might breach the support level 80, after which short squeeze is expected, then the pair could continue depreciating. Therefore, we are looking at 77 at the end of the second quarter. By the year end USD/JPY will be heading towards 75.

For the end of this quarter we forecast USD/JPY to be at 77. In the near term we can see the further downside pressure on USD/JPY. The pair might breach the support level 80, after which short squeeze is expected, then the pair could continue depreciating. Therefore, we are looking at 77 at the end of the second quarter. By the year end USD/JPY will be heading towards 75.
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