Societe Generale Research likes short USD/JPY exposure going into 2023 with a target at 1.10, and a stop at 140.
"It took USD/JPY only a handful of months to fall back to 100 after almost reaching 150 in the summer of 1998. The Asian crisis dragged it back up to 135 in early 2002, but it was back at 115 after a few months. More recently, the USD/JPY rally from 100 to 125 in 2H15 was completely reversed in 1H16," SocGen notes.
"The stock of Japan’s foreign assets, and the need to manage FX hedge ratios, encourages these acute moves, and after the big USD/JPY rally seen since the end of 2020, a repeat is easy to imagine," SocGen adds.