USD/JPY: Guided by the risk sentiment - Westpac

Robert Rennie, Research Analyst at Westpac, notes that the sharp rise in risk aversion over the last week has seen the ¥ strengthen and they see risks that markets will remain risk averse into September as US tariff action develops, the Italian budget becomes more of a focus and the Fed raises rates.

Key Quotes

“This should be “enough to keep USD/JPY in a 110/112 over the next few weeks” or so.”

“However, we still hold out hope for higher levels. The Fed is likely to deliver hikes in Sep and Dec. The most recent settlement period from the BoJ did show a sharp uplift in the pace of increase of JGB purchases emphasising how strong the commitment is. Thus we see still higher levels in the months ahead.”