USD/JPY: out of the woods? – Rabobank

Analysts at Rabobank offered a brief preview of the USD/JPY pair and expect spot prices to oscillate in a broader trading range between the 130-135 psychological marks.

Key Quotes:

“The BoJ is clearly the outliner amongst its G10 peers. While all the others are gripped by a determination to dampen the inflation rate, the BoJ is attempting to nurture it.  Having struggled with disinflationary and deflationary pressures for decades, Governor Kuroda sees an opportunity to finally create a virtuous cycle between wage inflation, demand and corporate profitability.  Speculators have been disappointed that the BoJ has stuck to its hugely accommodative policy during the past few months. “

“However, green shoots are appearing in relation to wage inflation that suggest that the BoJ could alter its YCC policy in the foreseeable future on its own terms.  The move lower in US bond yields from their June highs and the resultant fall in the spread vs. JGB yields has reduced pressure on the JPY and, for now, vindicated the decision of Kuroda not to pander to speculators.  USD/JPY is likely to remain sensitive to moves in US yields.  For now it seems that USD/JPY may favour a 130 to 135 trading range.”