According to Taisuke Tanaka, Strategist at Deutsche Bank, USD/JPY downside risk remain prevalent and it could reach 110 in the coming three months. Key Quotes: “The good news for Japan is that any rush to sell the USD has been limited due to the retreat in risk-off sentiment, and the bottom has held firm at ¥110-112. Indeed, the fundamentals do not offer any reason for excess pessimism. Still, we can hardly be optimistic and do not expect the upswing in equities and commodities to be sustained even with the improvement in US indicators.” “We remain vigilant against downside risk in the USD/JPY over the next three months once the autonomous comeback in risk markets ends. The government is unlikely to allow a drop below ¥100 just before the Upper House election in July and may seek to halt any decline to ¥105-110 through currency intervention.” “At the same time, it will want to avoid criticism of weak yen guidance at the G20 Summit in May, which Japan will be hosting. If the markets suspect that these circumstances will limit the scale and sustainability of any intervention action, speculators and Japanese hedgers could increase their dollar selling at around ¥110.” For more information, read our latest forex news.