"If we look at the period pre-crisis in Japan we had dollar yen in a 103 to 125 range. We're finally breaking back into the pre-crisis range for dollar-yen."
- Timothy Riddell, head of global markets research for Asia at ANZ
Despite low trading volumes the USD/JPY currency pair is climbing higher, as the Yen hit a five-year low at 104.83 versus the buck on Thursday, heating up speculations the pair can rally further next year. A week earlier economists from Societe Generale said the pair can reach 115 over the next 18 months, as they expect more stimulus from the Bank of Japan. The recent performance, however, forced analysts to become even more bearish, suggesting the Japanese currency can fall as low as 125 per Dollar by the end of the next year. Kuroda's pledge to continue his unprecedented stimulus programme as well as the fact the Federal Reserve starts trimming its QE are making this forecast quite realistic.
The depreciation of the Japanese currency has been one of the biggest stories of 2013. The currency has lost more than 20% against the greenback amid Japanese government's efforts to radically reform the world's third largest economy in a bid to achieve its 2% inflation target within two years' period. However, after a sharp drop in the first half of the year, the downside trend appeared to lose steam, as taper talks and doubts about Abenomics ability to boost growth prompted the Yen to rebound back to 94 level in June. Nonetheless, the recent positive data from Japan and fresh news from the Fed helped the Yen's downward trend to regain some momentum by the end of the year.
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