USD/JPY points to 112.00 in 3-month – Danske Bank

Senior Analyst at Danske Bank Morten Helt expects the pair to tick higher to the 112.00 area in a 3-month horizon.

Key Quotes

“In our previous forecast we anticipated a bounce in USD/JPY driven by an announcement of coordinated fiscal and monetary easing package. This did not materialise and we have consequently revised our USD/JPY forecast lower for the coming 12M”.

“In our main scenario, we expect the UK to remain in the EU and expect USD/JPY to bounce on this outcome. We target 108 in 1M (112). On a 3M horizon we look for further support to the cross stemming from relative rates (BoJ rate cut in July and Fed hike in September). We target 112 in 3M (115)”.

“On a 6-12M horizon, we expect USD/JPY to stabilise as further portfolio outflows out of Japan (driven by negative interest rates in Japan) will help to underpin USD/JPY and thereby counter the underlying support for JPY stemming from fundamental flows and valuations”.

“In this respect, we also note that the combination of fiscal stimulus (less domestic savings) and a higher oil price is likely to weigh on Japan’s current account balance in coming years. We target USD/JPY at 112 in 6-12M”.