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§ USD/JPY rose above the 107-handle as investors hung on to
BOJ Governor Kuroda’s comments yesterday that the central bank would not
hesitate to act to bolster the economy. However, this
could be an overshoot as speculators chose to ignore the other part of the
governor’s comments that he saw no need to act now given steady progress toward
meeting its price target. So pullbacks are possible and should be an
opportunity to buy.
§ As for the JPY/SGD, the cross has broken below the
1.18-handle, sighted around 1.1785 current – a low not seen since 1998. The
resilience of the USD/SGD so far, suggests that moves are largely due to the
USD/JPY. Given the current weakness in the JPY, we reckon that
moves below the 1.17-handle are possible in the near term, though the grind
lower is likely to be gradual. Look for the 1.16-handle to provide support.
§ Given recent bullish tones in the dollar on expectations of
Fed normalization next year, we now expect the USD/JPY to bounce higher by the
end of the year with the possibility of the pair hitting 110. However, the lack
of progress on the third arrow of Abenomics and the likelihood that BOJ would
not pursue further policy easing this year suggest that upside moves by the
USD/JPY could be capped with the pair now expected to end the year
at 108 (previous: 105) and remain there for the next
three-months.
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