© Esther Maria Reichelt
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Recently, we can see that the USD/JPY has moved upwards quite considerably, although from a fundamental perspective nothing has changed on side of the Yen. I suppose a large part of the movement has been due to the U.S. Dollar recent strength. Moreover, the Bank of Japan remains quite optimistic in respect of the economic recovery path in the country, and there is no immediate reason for the further excessive weakness of the Yen, as long as the BoJ does not change its view. The EUR/JPY will be dominated by the Euro's side. We do not expect that the ECB quantitative easing speculation will increase further this year, we believe that the EUR/JPY should only decrease quite gradually.
What will be the main drivers for the Yen during the fourth quarter of this year?
The development of inflation on the JPY side could lead to a fast change in the BoJ's view. In case inflation adjusted for tax effects drops below 1%, we assume that the Bank of Japan could quite fast ease its monetary policy even further. Moreover, a sharp deterioration in real economic indicators, such as retail sales and industrial production, could lead to increasing speculations on further easing – and would weaken the Yen. If the Japanese economy does not show clear signs of recovery in Q3, the pressure on the BoJ for further measures will increase.
What are your forecasts for the USD/JPY and EUR/JPY for the fourth quarter of this year?
We anticipate the USD/JPY to be at around 106 by the end of the year. And talking about the EUR/JPY currency pair, we can see it rolling up to 138 levels.