Head of Japanese FX research, Yunosuke Ikeda is unconvinced that he needs to change his outlook
USDJPY is going to 130 say Nomura. Forget safe haven flows, forget tumbling stock markets, the yen is going to fall more than 10% because the BOJ's negative interest rates will have investors buying more overseas assets and US borrowing costs will rise.
"There is nothing convincing to alter the outlook. The most important checkpoints for now are a set of US data in early March. If we can confirm recession risks are low, the 130 forecast can be maintained.
The worst case scenario is the low conviction risk off will become high conviction should the US become decisively bad. For this, the ISM manufacturing and non-manufacturing, as well as the jobs data due early March, are very significant" Says Ikeda
He adds that the price could run up to 117-118 immediately if risk aversion eases and there are indications of economic strength. Intervention will only be seen if we fall below 105.00 and until then, the BOJ will deal with yen rises by strengthening their negative rate policy.
Do you agree?
There's a lot that can happen between now and the end of the year. If the Fed has hiked two or more times by then, that target could be achieved. What's also on his side is that there's a big chance the market has leaned too far towards the Fed not hiking. That in itself increases the chances of reversal of that sentiment being very volatile if it happens.
