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20 Dec 2013
Flash: Further JPY weakness ahead - Nomura
FXstreet.com (Bali) - According to Yujiro Goto, FX Strategist at Nomura, the break of 104 in USD/JPY communicates further strength ahead.
Key Quotes
"Although the timing of tapering is slightly earlier than our economists' expectations, the size of tapering was just $10bn, which is in line with many expected. Enhanced forward guidance, which may be a weaker form than some expected, has managed to limit volatility in the fixed income market."
"We have learned this summer that higher US yields with high volatility may not necessarily be positive for USD. The stable fixed income market after the Fed's first step to normalize its monetary policy is a positive development for a USDJPY bull scenario."
"The gradual widening in the yield spread between the US and Japan without much volatility in the market should attract more investment inflows into the US, as the Fed keeps tapering. Positive reactions in the equity market are also positive for a mid-term JPY weakness scenario."
In contrast to the Fed's monetary policy, the BOJ is still likely to keep an accommodative policy stance. The BOJ is likely to keep, or even accelerate, its asset purchases throughout 2014. The BOJ's accommodative stance should also keep contributing to the widening in the yield spread between the US and Japan."
Key Quotes
"Although the timing of tapering is slightly earlier than our economists' expectations, the size of tapering was just $10bn, which is in line with many expected. Enhanced forward guidance, which may be a weaker form than some expected, has managed to limit volatility in the fixed income market."
"We have learned this summer that higher US yields with high volatility may not necessarily be positive for USD. The stable fixed income market after the Fed's first step to normalize its monetary policy is a positive development for a USDJPY bull scenario."
"The gradual widening in the yield spread between the US and Japan without much volatility in the market should attract more investment inflows into the US, as the Fed keeps tapering. Positive reactions in the equity market are also positive for a mid-term JPY weakness scenario."
In contrast to the Fed's monetary policy, the BOJ is still likely to keep an accommodative policy stance. The BOJ is likely to keep, or even accelerate, its asset purchases throughout 2014. The BOJ's accommodative stance should also keep contributing to the widening in the yield spread between the US and Japan."