Bank of America Global Research discusses the JPY outlook in light of Japan's latest Balance of Payments (BoP) data for June and a preliminary portfolio investment report for July.
"Key highlights: Basic BoP has been positive for JPY since 2Q, led by trust accounts’ selling in foreign equities and a slowdown in outward FDI. We think these are temporary," BofA notes.
"Bank accounts sold foreign bonds in July when US yields declined, suggesting light positioning. Seasonality and political uncertainty could favor JPY in August. However, the 2017 analogue implies a mid-cycle rise in US rates will be negative for JPY. We see JPY resuming its downtrend in the fall," BofA adds.