Markets look to sell rallies in 150 – Rabobank

So far this month, the USD is the best performing G10 currency by a clear margin. JPY had a roller coaster of a summer and the shockwaves continue to be felt. The rapid run in JPY-backed carry followed the BoJ’s surprise decision to raise rates at its July policy meeting, notes Rabobank currency analyst Jane Foley.

Falling USD strength keeps JPY on the back foot in the short term

“In our view, the overall direction of USD/JPY over the medium term is likely to be lower. Behind the BoJ’s slow policy normalization is an economy that is slowly shrugging off the mindset associated with decades of disinflation and deflationary pressures.”

“Optimism is already building that next spring will bring another set of strong wage deals for unionized workers that will help support consumption and the profitability of domestic firms. Changes in stock market governance and the government’s push to promote investment are another part of Japan’s changing fundamental landscape, as is the government’s push to position the country as a partner with the US in areas such as technology.

“While a strong USD could keep JPY on the back foot near term, we would look to sell upside in USD/JPY150.”