USD/JPY: Further Upside Risk; BoJ To Turn More Aggressive - Credit Agricole
19 April 2016, 15:44
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It appears that last weekend’s rather disappointing outcome of Doha talks had only limited impact on investors’ appetite for risk assets. This is especially true as commodity currencies such as the AUD and NZD were among the strongest currencies since the start of the week. It appears that investors’ appetite for risk assets does not dependently need to soften as long as capped commodity price developments are not the result of lower global growth expectations.
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We believe that lower yielders such as the JPY should remain a sell on rallies. This is not only due to falling cross market volatilities, but also due to the view that the BoJ will have to turn more aggressive by the end of the month.
USD/JPY should face further upside risks, especially as Fed-BoJ monetary policy expectations should ultimately diverge in favour of the pair. Fed’s Rosengren stressed overnight that they are starting to see wages picking up in some markets and that the Fed will be raising rates faster than the markets think.
