Summary:
Despite weak US job market and inflation, the yen remains subdued at 147.60 against the dollar, below last year's intervention threshold.
There has been little relief for the yen despite softening US labour market and inflation. The currency trades at around 147.60 against the dollar, well below the level that triggered official intervention last year.
An influential forecaster’s latest prediction could make traders with net long exposures to the yen rethink their ‘buy the dip’ strategy. Hedge funds and leverage funds boosted yen net shorts anew since early June, based on CFTC data.
The yen will probably weaken to 152 this year, and 155 in 2024, and a potential abandonment of YCC would not help in the long-term, Tohru Sasaki, head of Japan markets research at JPMorgan, said in an interview.
The yen touched a fresh 10-month low this week, prompting a stern warning from top currency official Masato Kanda against short speculators. However, Tohru was sure that ‘the yen is likely to be one of the weakest currencies even next year.’
His forecast for dollar-yen is higher than the median of analysts surveyed by Bloomberg. They see the laggard at 140 in the next quarter and 129 next year.
Tohru also predicted that multiple cross-yen pairs will ratchet up higher next year though the yen has weakened against all of its Group-of-10 counterparts this year.
‘Maybe the BOJ needs to hike the policy rate without thinking of the other negative impacts on the economy. But that will cause the unpopularity of the Kishida cabinet, so it’s politically difficult,’ he added.
Speaking of closely-watched potential intervention, he believed that only a break below 155 level could prompt the Japanese government to step in. ‘With a yen purchase intervention, they cannot fail. They need to use reserves are limited.’
Disclaimer: This material is for general information purposes only and is not intended as (and should not be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by EBC or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.
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