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.
“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”.