JPY Remains Bid in the Short-Term – Rabobank
The Japanese safe haven could remain well supported in the near-term, suggested Jane Foley, Senior FX Strategist at Rabobank.
Key Quotes
“Much
of the volatility in the JPY crosses this year is the result of safe
haven demand, some can probably be linked to speculators’ flow and a
part has been created by poor communication from the BoJ”.
“The
sharp spike in the value of the JPY on April 28 bore testament to the
size of the disappointment wielded on the market by the BoJ’s decision
to leave policy unchanged”.
“On the back of a newswire report that the BoJ
may consider applying a negative interest rate on some loans to
financial institutions, expectations that the BoJ could be prepared to
go an extra mile to push its CPI target back on course and weaken the
yen had been pushed to elevated levels”.
“Clues as to the BoJ’s
decision to stand pat can be found in the minutes of the January 29
policy meeting. The decision to introduce a negative interest rate was
greeted with dissent from four of the nine members in the committee”.
“Our
forecast for a June Fed rate hike suggests we see scope for some
recovery in USD/JPY on a 3 month view. That said, while we do expect the
BoJ to offer more policy stimulus this year, the perception that the
BoJ is running out of road may keep the JPY well bid in the near-term”.
