USD/JPY: Risks skewed to the upside – Danske Bank

USD/JPY traded higher and temporarily broke above 113 yesterday supported by a steepening of the US yield curve, explains Senior Analyst, Kristoffer Kjær Lomholt at Danske Bank.

Key Quotes

“With equity markets selling off yesterday, USD/JPY price actions underscores that the US fixed income market remains the most important driver for JPY. The cross is likely to remain underpinned by US tax reform and potentially a re-widening of USD basis near term. Moreover, we see risks skewed to the upside in relation to the BoJ meeting, which ends tomorrow where in particular the cross could trade higher if BoJ Governor Kuroda manages to talk down the tightening speculation he has prompted in recent months by mentioning the reversal rate. However, we still see USD/JPY trading mostly sideways within the 111.65-114.50 range near term, targeting 113 in 1-3M.”