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Mar 26 - 02:55 PM

Danske: Staying Structurally Bearish USD/JPY Targeting 145 in 3 Months Ahead of 140

By eFXdata  —  Mar 26 - 01:30 PM

Synopsis:

Danske Bank maintains a structurally bearish stance on USD/JPY, projecting a steady decline towards 140 over a 12-month horizon. The forecast is underpinned by expectations of narrowing yield differentials favoring the Japanese Yen (JPY), as G10 central banks, including the Federal Reserve, are anticipated to initiate rate-cutting cycles within the coming quarter. Furthermore, a global backdrop characterized by subdued growth and inflation is expected to support the JPY's appreciation.

Key Points:

  • Yield Differentials: The bank predicts that yield differentials will shift in favor of the JPY, particularly as major central banks, notably the Fed, start reducing interest rates.
  • Global Economic Conditions: A weakening global economic environment, marked by softer growth and inflation, is traditionally conducive to JPY strength, suggesting a favorable period ahead for the currency.
  • Forecast Targets: Danske Bank's outlook includes a 3-month forecast of USD/JPY at 145, progressing towards a 12-month target of 140, reflecting a gradual yet consistent depreciation of the pair.

Conclusion:

Danske Bank's analysis suggests a bearish trajectory for USD/JPY, driven by an expected shift in yield differentials and a global economic landscape conducive to JPY strength. The bank's forecast highlights a methodical depreciation of the pair over the next year, aligning with broader expectations of easing monetary policies among major central banks and softer global economic indicators.

Source:
Danske Research/Market Commentary

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