Pair USD / JPY, probably make a mess up from its current range, predicts BNP Paribas.
“She mostly traded between 100.98 and 103.88 marks YTD. Although we expect that the catalyst for the couple to become U.S. monetary policy, they may be and BOJ, as the inflation rate in Japan is today one of the highest in the G10. Our economists predict that the Bank of Japan will “financial pressure” to limit the growth of government bond yields due to the financial dynamics of the country, “- explains the BNPP.
“Excessive inflation in Japan to weaken the yen. If inflation gets out of control, the central bank can start the policy of reducing the long-term and short-term rates increase – what we have seen in the United States. This will entail an aggressive buying of government bonds and raise interest rates to curb inflation. Inversion of the yield curve, along with the risk of rising inflation – this is an extreme scenario for Japan, which certainly will cause weakening of the yen, “- says BNPP.
“In addition, the redistribution of public pension investment fund and a possible increase in capital outflows, weaken the Japanese currency,” – adds BNPP.
According to this forecast, the bank retains long positions in USD / JPY, as a trading recommendation, with a mark of 101.85, target – at 105.50 and stop – at 100.65.