CIBC Research discusses the JPY outlook and maintains a medium-term bullish bias into 2019, expecting USD/JPY to fall below 110 early next year.
"We underlined last month (see here) three key reasons why we remain constructive on the JPY outlook: Japan’s large current account surplus, its net-creditor status and the BoJ’s stealth tapering. All of these represent a land of the rising sun for the yen in terms of a medium term appreciation ahead.
The recent uptick in risk aversion could also see domestic investors stay within Japan in order to earn a return. Speculative JPY shorts have reached eight month highs, suggesting that there is scope for a short covering rally, which would lend further support to the yen," CIBC argues.