USD/JPY seen around 112.00 in the near-term – Danske Bank

The pair is expected to edge higher towards the 112.00 handle in a 3-month’s view, suggested Christin Tuxen, Chief Analyst at Danske Bank.

Key Quotes

“Elevated political uncertainty following the inauguration of the Trump administration as well as rising geopolitical tensions both involving Russia-US over Syria and in relation to North Korea could lend support to JPY”.

“That said, a key driver for USD/JPY term remains relative interest rates: with the BoJ essentially having ‘fixed’ the Japanese yield curve, the outlook for higher rates in the US as Fed will tighten more than priced in our view suggests that USD/JPY could again start to move away from fundamentally justified levels near term”.

“In the absence of geopolitical events we expect the cross to head higher yet again as the job of BoJ in generating sustained inflation is not done yet”.

“We look for a steady move higher in the pair, looking for 112 in 3M (prev. 115), 114 in 6M (prev. 118) and continue to see the cross headed for 116 (i.e corresponding to the late 2016 highs) in 12M (prev. 118)”.