USD/JPY: Fed policy will be the most important factor in determining the outlook for the yen – CitiBank

While a more positive risk backdrop is likely to lessen demand for the Japanese yen as safe-havens, this is likely to lead to a less constructive outlook against risk currencies, like the euro, the commodity block and emerging markets, explained analysts at Citibank. They see the USD/JPY pair hovering around 107 over the next months. 

Key Quotes:

“We remain less constructive on the performance of JPY relative to other G10 peers due to our expectation for relative real rate differentials to favour a more range bound path. Ultimately, with the BoJ willing to remain reactive, not proactive, in their MoPo efforts, Fed policy will be the most important factor in determining the outlook for JPY.”

“If USDJPY closes below the November 8th low at 103.18, which should open up the way for renewed losses towards a major support range at 101.19-69, consisting of a long term rising trend line and horizontal levels off the lows from Nov 1999, Jan 2005, and March 2019.”