Yen to Remain on Rise on Japan's Delicate Intervention Situation – Deutsche Bank
Yen to Remain on Rise on Japan's Delicate Intervention Situation – Deutsche Bank
Taisuke Tanaka, Strategist at Deutsche Bank, notes that the USD/JPY slid
below ¥110 last week and this is the internal base rate for many
Japanese exporters in the new fiscal year.
Key Quotes
“They
have heightened their readiness to sell the USD/JPY on any rebound. We
believe resistance to a rebound has reduced the rate from ¥115 to ¥110.
We expect the rate to continue to try the downside, which could further
lower the resistance level to the ¥105-110 range.
A comeback to
¥110-115 would require for now that Japanese market participants clear
away their current USD/JPY exposure, and eventually that hopes reemerge
of a US economic expansion and further Fed rate hikes. Economic
indicators of note this week include US CPI (Thursday), industrial
production (Friday) and the University of Michigan Consumer Sentiment
Index (Friday), and China's CPI (Monday), auto sales (Tuesday), trade
data (Wednesday) and GDP (Friday). However, we do not foresee a
turnaround in the USD/JPY in the near future from a fundamentals
perspective.
As long as the yen faces upward risk, the focus for
the markets is likely to be the forex interventions by Japanese
authorities. Japan may seek a shared expression of concern at the G20
meeting of finance ministers and central bankers this Thursday and
Friday that a strong yen could harm market sentiment not only in Japan
but globally. If this proves difficult, Japanese authorities may work to
avoid direct mention of the yen at G20 and lean on the US to
acknowledge the need for a stable USD/JPY in order to lay the groundwork
for a potential market intervention.
We maintain our view that
the MoF/BoJ will intervene to secure the rate at ¥105-110 level ahead of
the upcoming domestic election(s), but it could be forced to shift its
defense line to ¥100 depending on the US reaction. We suspect the
markets will see through Japan's delicate intervention situation and
expect the yen to continue to try ¥105 or lower.”
(Market News Provided by FXstreet)
