Looking at the G10 currencies in June shows that the Dollar weakened, but that the Yen softened even further. Yen selling is likely to continue in the short term, in the view of economists at MUFG Bank.
A policy shift by the BoJ could result in a considerable strengthening of the Yen
We expect USD/JPY to come under downward pressure from moves by the BoJ and the Japanese authorities in the short term and by changes in the Fed’s monetary policy over the medium term.
A policy shift by the BoJ could result in a considerable strengthening of the Yen. However, in the immediate term, or if the BoJ does not shift gears at the July monetary policy meeting, we see the risk of the Yen weakening further.
The decline in the yen’s real interest rate, which has driven the yen’s recent weakness, is also nearing its limit. Market adages warn of the dangers of market highs and lows, but based on last year’s experience, we expect USD/JPY to move towards 150 if it breaks above 145 with momentum. We therefore raised the upper end of our forecast range.
