USD/JPY: Forecast at 147.00 in a three-month perspective – Rabobank

The USD/JPY is falling on Tuesday, trading around 144.50, after approaching the multi-year high near 146.00. According to analysts from Rabobank, only a weaker US dollar could change the bullish dynamic for the USD/JPY. They have a 3-month forecast at 147.00.

Key Quotes: 

“The late September FX intervention in support of the JPY vs. the USD had the effect of suggesting to the market that the USD/JPY 145.00 level was an unspoken line in the sand for the MoF.  This was part of a game of chicken that Japanese officials and the market have become involved in.  It is very clear to all participants that FX intervention cannot turn the direction of a currency pair unless the fundamentals are also pulling in the same direction.  In the current instance, the hawkishness of the Fed coupled with the dovishness of the BoJ means that fundamentals are still tugging USD/JPY higher.”

“Another lurch higher in USD/JPY in the coming weeks may trigger some renewed verbal intervention from the MoF, but eventually that would have to be followed by more action – a decision which wouldn’t be taken lightly.”

“In view of the fact that Japan has suffered minimal wage inflation for decades, it may be optimistic to hope that Japan could be on the cusp of a structural move away from deflationary pressures.  This, however, is the aim of policymakers.  Signs that the spring wage talks bring higher wages could end policies such as yield curve control on the BoJ’s terms. Failing this only a weaker USD is likely to change the dynamic for USD/JPY.  We expect USD strength to prevail for some time and at least into next spring.  We maintain a 3 month forecast of USD/JPY 147.00.”