MUFG Research discusses USD/JPY outlook and maintains a bearish bias, expecting prices to keep declining at a slow pace towards 104.50.
Investors typically turn to JPY and CHF in averting risk. JPY selling by Japanese investors buying overseas assets is likely to support USDJPY at times, but the trend is for JPY strengthening, if only at a slow pace. However USD remains firm against RMB and other emerging country currencies and some G10 currencies, including AUD, which has softened on falling resource prices and developments with China," MUFG notes.
"Overall, though, USD is expected to weaken slightly, as another rate cut this year is increasingly factored in and with the 10Yr yield falling to 1.6%. We expect USDJPY to slowly decline, and it could break the 105 level on growing risk aversion," MUFG adds.