Citi discusses USDJPY outlook and maintains a bearish bias, expecting a move towards 99 in Q1 and towards 97 in the first half of this year.
"While overall USD weakness is the main reason, we think inward portfolio investments into the Japanese share market can be an additional factor to appreciate the Yen. Given the strength of US equities, we would not be surprised if the Nikkei 225 tests 30,000, but stronger share prices won’t be positively correlated with USDJPY unusually this time," Citi notes.
"Our base scenario is for USDJPY to fall further to around 97 in the first half of this year. While we believe JPY will not outperform other G10 like EUR or AUD in a risk -on environment (our base scenario), the risk scenario with a subjective probability at around 25% is for USDJPY to fall to around 95 this year," Citi adds.