USD/JPY could reach 115.00 in 3-month – Danske Bank

Morten Helt, Senior Analyst at Danske Bank, believes the pair could accelerate the upside to the 115.00 area in a 3-month view.

Key Quotes

“It is our view that a combination of fiscal easing, including a delay in the planned VAT hike and monetary easing, has the scope to lift USD/JPY back into the 112-117 range”.

“Short term FX factors, such as a stretched long JPY positioning combined with USD/JPY being oversold and according to our short-term financial model, imply that combined policy actions could turn the tide for the yen this time around”.

“We target 115 in 3M. On a 6-12Mhorizon, we expect negative interest rates in Japan to lead to a gradual pick up in portfolio outflows out of Japan stemming from a reshuffle of pension funds’ assets”.

“This will help to underpin USD/JPY and thereby counter the underlying support for the JPY stemming from (1) the currency being fundamentally undervalued, (2) a current account surplus and (3) a positive net international investment position. Moreover, we expect relative rates to remain supportive for the cross on a 3-12M horizon. Wetarget USD/JPY at 116 in 6-12M”.