12 Dec 2014
Trading Yen may require greater acumen in 2015 - DB
FXStreet (Barcelona) - Taisuke Tanaka, Strategist at Deutsche Bank, thinks that Yen trading in 2015 will likely require acumen as macro-economic and monetary policy trends in the US and Japan do indeed point to further yen weakness.
Key Quotes
“We have long been serious yen bears, and expect a continued uptrend for the USD/JPY to 125 at end-2015 and 130 at end-2016. As some in the market have recently forecast 130-140, our yen-bearish forecast looks modest now.”
“We see buying the dollar on weakness and selling it into strength as likely a good strategy for short-term investors and hedgers. However, the medium to long term FX investments needs to consider when/where to hedge or to exit. We also advise currency hedging for direct foreign investment at 120-130. We think Japanese investors will be increasingly unlikely to build up currency exposure at over-120 level.”
“We see BoJ policy and pension flows as likely to continue providing mild support to the USD/JPY, but do not think they will be the drivers of explosive yen depreciation. Rather, we are concerned that additional monetary easing by the BoJ in a coming year may create the impression that the impact of QQE could be reaching its limits.”
“Combined with factors such as an easing in the pace of US economic recovery, share price fluctuations and increased USD/JPY volatility around the time the Fed hikes interest rates, other shocks (e.g., geopolitical risk) and a retreat in currency trading liquidity amid toughening financial regulations, we cannot exclude the possibility that the USD/JPY's uptrend may hit some turbulence.”
“As far we can tell based on Japanese and US economic conditions and monetary policy, we think the up-cycle for the USD/JPY will likely continue for longer than the previous cycle (2005-07).”
Key Quotes
“We have long been serious yen bears, and expect a continued uptrend for the USD/JPY to 125 at end-2015 and 130 at end-2016. As some in the market have recently forecast 130-140, our yen-bearish forecast looks modest now.”
“We see buying the dollar on weakness and selling it into strength as likely a good strategy for short-term investors and hedgers. However, the medium to long term FX investments needs to consider when/where to hedge or to exit. We also advise currency hedging for direct foreign investment at 120-130. We think Japanese investors will be increasingly unlikely to build up currency exposure at over-120 level.”
“We see BoJ policy and pension flows as likely to continue providing mild support to the USD/JPY, but do not think they will be the drivers of explosive yen depreciation. Rather, we are concerned that additional monetary easing by the BoJ in a coming year may create the impression that the impact of QQE could be reaching its limits.”
“Combined with factors such as an easing in the pace of US economic recovery, share price fluctuations and increased USD/JPY volatility around the time the Fed hikes interest rates, other shocks (e.g., geopolitical risk) and a retreat in currency trading liquidity amid toughening financial regulations, we cannot exclude the possibility that the USD/JPY's uptrend may hit some turbulence.”
“As far we can tell based on Japanese and US economic conditions and monetary policy, we think the up-cycle for the USD/JPY will likely continue for longer than the previous cycle (2005-07).”