The USD/JPY saw a rally following what ultimately proved to be a widely anticipated rate hike by the Bank of Japan (BoJ). Analysts at ING delve into the future prospects of the currency pair.
More of a Dollar story
The prevailing consensus suggests that due to the significant gap in interest rates between Japan and numerous other central banks within the G10 sphere, the Yen will continue to serve as a funding currency in a low-volatility environment.
Our fundamental outlook now projects USD/JPY potentially hovering within the range of 150.00-152.00, provided short-term US rates maintain their strength. As these rates gradually decline in the upcoming months, USD/JPY is anticipated to decline towards the 145.00 level, and possibly reaching close to 140.00 by the end of the year as the Federal Reserve’s easing cycle gains momentum (we anticipate 125 basis points of Fed rate cuts within this year).
