12 Dec 2014
USD/JPY may resume its climb next week – DBS
FXStreet (Barcelona) - According to the DBS Research Team, the fall in USD/JPY was linked to the fall is US equities, and is not indicative of a disappointing Japanese election outcome, further adding that speculation is strong for a resumption of the upward climb for the pair next week.
Key Quotes
“USD/JPY returned lower into a 115-120 range ahead of this weekend’s snap elections in Japan scheduled for 14 Dec. The yen’s recovery is not signaling a disappointing election outcome for PM Shinzo Abe. In fact, some newspaper polls indicated that the ruling Liberal Democrat Party may increase its representation in the lower house of parliament. The fall of USD/JPY was more linked with the recent fall in US stocks during 8-10 Dec. Owing to global growth concerns from the unabated fall in oil prices, investors have sought the yen and gold as safe have assets again.”
“Given the supply-side price pressures from lower oil prices, the Bank of Japan has started debating if it needs to reset its goal post for inflation to hit 2% in 2 years. After all, PM Abe has already pushed the second sales tax hike to by 18 months to Apr 2017 from Oct 2015. The BOJ has already announced QQE2. The immediate post-election focus for the Abe cabinet is to revive the economy and bring it out of its recent technical recession.”
“Nonetheless, there is speculation that USD/JPY may resume its climb next week. Attention will shift to the FOMC meeting on 17 Dec after the snap election on Sunday. In America, top officials and policymakers have been hammering the message that lower oil prices are tax cuts that benefit US consumers, and that the US economy is coming back from its 2008 crisis. Fed Chair Janet Yellen is unlikely to deviate from the script during her post-FOMC press conference. The market will not be surprises if “considerable time” is dropped from the FOMC statement either.”
Key Quotes
“USD/JPY returned lower into a 115-120 range ahead of this weekend’s snap elections in Japan scheduled for 14 Dec. The yen’s recovery is not signaling a disappointing election outcome for PM Shinzo Abe. In fact, some newspaper polls indicated that the ruling Liberal Democrat Party may increase its representation in the lower house of parliament. The fall of USD/JPY was more linked with the recent fall in US stocks during 8-10 Dec. Owing to global growth concerns from the unabated fall in oil prices, investors have sought the yen and gold as safe have assets again.”
“Given the supply-side price pressures from lower oil prices, the Bank of Japan has started debating if it needs to reset its goal post for inflation to hit 2% in 2 years. After all, PM Abe has already pushed the second sales tax hike to by 18 months to Apr 2017 from Oct 2015. The BOJ has already announced QQE2. The immediate post-election focus for the Abe cabinet is to revive the economy and bring it out of its recent technical recession.”
“Nonetheless, there is speculation that USD/JPY may resume its climb next week. Attention will shift to the FOMC meeting on 17 Dec after the snap election on Sunday. In America, top officials and policymakers have been hammering the message that lower oil prices are tax cuts that benefit US consumers, and that the US economy is coming back from its 2008 crisis. Fed Chair Janet Yellen is unlikely to deviate from the script during her post-FOMC press conference. The market will not be surprises if “considerable time” is dropped from the FOMC statement either.”