MUFG: Greater draw back dangers for USD/JPY forward

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MUFG expects additional JPY power and draw back dangers for USD/JPY, pushed by reversing international inflation tendencies, declining US yields, and BoJ price hikes. Whereas USD/CNY upside may exert short-term strain on JPY, JPY is more likely to weaken lower than different G10 currencies because of its safe-haven standing.

Key Factors:

  1. JPY Energy Pushed by BoJ Coverage Shift & Market Dynamics

    • BoJ’s 25bp price hike (to zero.50%) was the most important improve since 2007, signaling a shift away from ultra-loose coverage.
    • Reversing international inflation tendencies and falling international yields scale back the earlier USD/JPY bullish drivers.
  2. Trump Tariffs & USD/CNY Upside Pose Quick-Time period Dangers

    • Preliminary optimism on tariffs light, resulting in renewed USD power and potential near-term JPY weak point.
    • If USD/CNY strikes larger, some JPY promoting strain might emerge, although JPY ought to outperform different G10 currencies.
  3. Lengthy-Time period Drivers Level to USD/JPY Decline

    • Extremely-low Japanese charges had been a significant component in USD/JPY rising from 115 to 160 in 2022-2023.
    • With these circumstances now reversing, JPY is more likely to strengthen within the coming quarters.

Conclusion:

MUFG maintains a bearish USD/JPY outlook, anticipating JPY power to speed up as international inflation eases, US yields decline, and BoJ coverage normalizes additional. Whereas short-term dangers exist from USD/CNY upside, the broader development favors USD/JPY draw back in 2025.

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This text was written by Adam Button at www.ubaidahsan.com.



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