JPY expected to depreciate further in the medium term – Danske Bank

Jens Sorensen, Chief Analyst at Danske Bank, sees the Japanese currency losing further ground within a year’s time.

Key Quotes

“JPY appreciated significantly yesterday after Prime Minister Shinzo Abe announced a delay of the planned VAT hike”.

“While negative risk sentiment can probably explain part of the strong yen performance, profit takings following a significant build-up in speculative short JPY positions over the past couple of weeks probably also explain yesterday’s price actions”.

“We still expect the Japanese government to announce a larger fiscal stimulus package in June and we also expect the Bank of Japan to cut its policy interest rates by 20bp to -0.3% in July”.

“We expect the combination of fiscal and monetary easing to lift USD/JPY back into the 112-117 range. We target USD/JPY at 115 in 3M and 116 in 6-12M, while we target EUR/JPY at 128.80 in three months”.