The Japanese yen has underperformed all of the other 16 currencies recognized by Bloomberg as’majors’ in the foreign exchange market this year. Since the June 16 FOMC meeting, just three of these currencies have outperformed the JPY. Jane Foley, Senior FX Strategist at Rabobank, believes that the JPY would only rise significantly in the coming months if risk appetite falls.
“The way the Fed communicates its monetary policy will determine how the JPY fares in the next weeks against the USD. Although a few other factors are expected to influence the USD/JPY pair, the widely held belief that the BoJ will not tighten policy settings for some time means that domestic policies in Japan will provide little support for the JPY.”
“Following the June FOMC meeting, USD/JPY hit a new fifteen-month high of 111.12 on June 24. The latter was a critical psychological resistance level, and failing to hold near this peak nearly always resulted in selling forces. Despite the downturn, USD/JPY has maintained its upward trend since the beginning of the year. The currency pair could go higher if it breaks above the 111.12 mark.”
“During the crisis, Japan has implemented three stimulus packages. More spending could be anticipated, despite a variety of state of emergency, a sluggish vaccination roll-out program, an upcoming election, and, astonishingly, a record high in tax receipts in the fiscal year ended March 2021.”
“The USD/JPY has surged faster than we expected as a result of the June FOMC meeting; we have revised our projections and now envisage a move to 112 by the end of the year.”/n
