MUFG Research maintains a bearish USD/JPY bias, expecting the pair to trade towards 103 through year-end.
"The yen correlation with equity markets has been very low while the correlation for most other G10 currencies has been considerably higher. The negative correlation between USD and equity markets has therefore resulted in sharper USD depreciation versus other G10 currencies than versus the yen. Eventually though catch-up is likely and that means continued downward pressure on USD/JPY reflecting broader conditions," MUFG notes.
"We have had a long-term view of gradual JPY appreciation. The aggressiveness of the COVID policy response has helped curtail JPY gains but the general global backdrop is consistent with JPY strength and eventual levels for USD/JPY below the 100 level are possible going forward," MUFG adds.