25 Aug 2015
USD/JPY: Appreciation forecast to 125 by year-end intact - Nomura
FXStreet (Bali) - A gradual USD/JPY appreciation into year-end is still likely, according to Yujiro Goto, FX Strategist at Nomura.
Key Quotes
"A continuous re-pricing of the Fed rate hike probability after the FOMC minutes were the key driver behind USD/JPY depreciation, while weak risk sentiment also encouraged position unwinding."
"In terms of domestic investment flows, margin traders’ JPY short positions may have accelerated JPY appreciation today. One of major margin trading brokers’ data shows that the difference between share of investors holding USD/JPY long and short positions as of last Friday were at its highest level since mid-May, accelerating sharply since 11 August when USD/JPY hit 125."
"Some of these JPY short positions likely hit stop losses, accelerating JPY appreciation amid the low liquidity environment. The contrarian style of margin traders is likely intact and they should remain as dip buyers in the medium term."
"Public pension funds have likely re-accelerated their portfolio shift, while FDI outflows are reaccelerating and the improvement in the trade balance has paused. Mid-term investment flows from Japan remain negative for JPY. In addition, market expectations for the Fed hike has scaled back and even December rate hike will be USD positive now. We keep our USD/JPY appreciation forecast to 125 by year-end."
Key Quotes
"A continuous re-pricing of the Fed rate hike probability after the FOMC minutes were the key driver behind USD/JPY depreciation, while weak risk sentiment also encouraged position unwinding."
"In terms of domestic investment flows, margin traders’ JPY short positions may have accelerated JPY appreciation today. One of major margin trading brokers’ data shows that the difference between share of investors holding USD/JPY long and short positions as of last Friday were at its highest level since mid-May, accelerating sharply since 11 August when USD/JPY hit 125."
"Some of these JPY short positions likely hit stop losses, accelerating JPY appreciation amid the low liquidity environment. The contrarian style of margin traders is likely intact and they should remain as dip buyers in the medium term."
"Public pension funds have likely re-accelerated their portfolio shift, while FDI outflows are reaccelerating and the improvement in the trade balance has paused. Mid-term investment flows from Japan remain negative for JPY. In addition, market expectations for the Fed hike has scaled back and even December rate hike will be USD positive now. We keep our USD/JPY appreciation forecast to 125 by year-end."