Bank of America Global Research discusses its latest bullish bias on USD/JPY.
The pace of the yen sell-off since August has exceeded our expectations. We have been right about the negative impact on the yen of the terms of trade shock and policy divergence, but we have underestimated the extent of the Fed’s policy tightening. We also think carry trades could keep JPY weak longer than the market expects," BofA notes.
"We previously argued USD/JPY would peak in the fall and correction would begin in 4Q22: We now make the following revisions to our view: • We push back the timing of USD/JPY’s peak in our outlook from 3Q22 to 1H23. • We expect a peak core range of 145-150, up from 135-140. • We expect a higher cyclical bottom at 125-130 in 2H24, from 120-125 previously," BofA adds.