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Sep 01 - 12:55 PM

USD/JPY: To Stay Elevated Before Staging A Major Correction Into Q4 Through Q3-'23; Where To Target? - BofA

By eFXdata  —  Sep 01 - 10:45 AM

Bank of America Global Research expects a major correction in USD/JPY in Q4 through Q3 of 2023. BofA targets USDJPY at 127 by year-end and 120 by Q3 of 2023.

"With lower oil prices and stalling outward M&A by Japan Inc., corporate JPY supply has likely peaked for now. However, investors' USD demand, another pillar of USD/JPY strength this year, could continue as the Fed's rate hikes boost the USD/JPY carry and hedge cost. In the last tightening cycle, USD/JPY declined and JPY strengthened after the Fed stopped hiking rates at end-2018 with developed market (DM) central banks unable to hike as much," BofA notes. 

"We expect USD/JPY to remain elevated until US inflation starts to decelerate. We expect USD/JPY to remain above 135 through the summer and corrected into 2023 from 4Q22. However, the structural JPY weakness should reemerge longer-term. We expect USD/JPY to end 2022 at 127," BofA adds. 

Source:
BofA Global Research

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