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USD/JPY: Natural gravity points to the downside - Danske

Discussion in 'Fundamental Analysis' started by FXStreet_Team, Apr 8, 2016.

  1. FXStreet_Team

    FXStreet_Team Well-Known Member Trader

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    According to analysts from Danske Bank, is difficult to image what will stop the downtrend in USD/JPY. They point out that a game changed could be a helicopter drop of policies.

    Key Quotes:

    “Another pressure point is building in USD/JPY where negative interest rates have been anything else other than effective. USD/JPY has fallen 11.27% since the Bank of Japan (BoJ) enacted negative interest rates in late January.”

    “Negative rates have hit Japanese banking stocks, Nikkei and thereby USD/JPY in line with the usual correlation. Near term, it is difficult to imagine what will stop the downtrend in USD/JPY as Japanese policymakers are unlikely to follow through with actual FX intervention just yet.”

    “Like the EUR, the JPY is undervalued and Japan is running a large current account surplus, which implies that the ‘natural gravity’ is for a lower USD/JPY. A possible deeper rate cut into negative terrain at the BoJ’s meeting in late April would be likely to have only a short-term impact on the JPY.”

    “Instead, a game changer could be a ‘helicopter drop’ of policies with a combination of aggressive fiscal stimulus, postponement of the planned consumption tax hike next year and more quantitative and qualitative monetary policy.”
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