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Apr 12 - 12:55 PM

ANZ: USD/JPY Likely to Reach 155, Views Intervention as Opportunities for Long Positions

By eFXdata  —  Apr 12 - 10:45 AM

Synopsis:

ANZ forecasts a rise in the USD/JPY exchange rate to 155, contrary to a potential decline to 150, based on recent economic indicators and the historical ineffectiveness of interventions. The analysis reflects expectations that interventions will serve merely as opportunities to establish or reinforce long positions in USD/JPY, given the unlikely impact of interventions to sustainably strengthen the Japanese Yen (JPY).

Key Points:

  • Limited Impact of BOJ Interventions: Past interventions by the Bank of Japan (BoJ) have shown only temporary effects on reversing USD/JPY trends. Historical precedents from 2010, 2011, and the early 2000s, alongside 2022 events, indicate that interventions do not fundamentally alter long-term currency trends but provide short-lived trading opportunities.

  • Economic Dynamics Influencing JPY Weakness: Current economic conditions, including a focus on sector-specific inflation pressures such as rising costs in the dining sector, do not indicate a broad-based rise in service prices or wages that could support a stronger JPY. The limited coverage of wage bargaining further diminishes the potential for widespread wage-driven inflation.

  • Prospects for Further JPY Weakening: Despite global financial pressures and internal economic policies, the outlook for JPY does not suggest a return to "historically normal" ranges. Instead, further policy tightening or interventions might lead to additional weakening of the JPY, as observed following the March BoJ meeting.

Conclusion:

ANZ maintains a bullish outlook on USD/JPY, predicting the currency pair will likely hit 155 rather than retracting to 150. This forecast is based on the limited efficacy of interventions in altering long-term currency trends and current economic indicators that do not support a stronger JPY. Investors are advised to view any future interventions as favorable moments to establish or increase long positions in USD/JPY, anticipating further potential gains in this currency pair.

Source:
ANZ Research/Market Commentary

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