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ING’s USD/JPY Forecast

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ING’s latest report on the USD/JPY forecast includes both short and long-term predictions for the currency. In this article, we will discuss some of the key points in the report and see how they might influence your own trading decisions.

ING's USD/JPY forecast

It is often hard to predict the direction of the dollar versus the Japanese yen. But there are a number of factors that will influence the pair’s short and long-term future. For example, the Bank of Japan’s interest rate policies could affect the yen. The Bank of Japan has a reputation for controlling interest rates. In May, it announced a plan to keep short-term rates very low, while raising them for longer
horizons. This triggered a rally in the yen. However, the yen is likely to remain weak for the foreseeable future.

While the BoJ’s monetary policy has encouraged a strong JPY, it could also be encouraging short positions. Analysts at ING expect the dollar to continue to outperform the yen in the near-term. They predict that the USD/JPY will remain in a
range of 140-145 for the rest of the year. They believe that the yen will continue to fall to 130 by the end of 2023.

There are many reasons why the USD/JPY has risen this year. One of them is the expectation that the US economy will continue to outpace the euro area in the next few years. In addition, the Fed has been aggressively raising interest rates to reduce
inflation. As a result, yen-funding currencies have been weakened. Another factor driving the yen’s decline is the Bank of Japan’s intervention. Over the last three days, the Japanese government has bought around JPY1 trillion. These purchases should keep the market on edge. However, if interest rates rise, the yen could be in for a bumpy ride.

Other factors that will impact the US/JPY pairing are economic developments in Asia. The Japanese yen is heavily involved in trading across several Asian markets. If global equities begin to fall, it may be hard for the currency to maintain its support level. A sharp drop in equity prices would lead to rapid losses for the USD/JPY. Finally, US monetary policy is important to the USD/JPY. With the Fed’s policy of “quantitative easing” in place, the US has become an attractive destination for capital, especially when hedged against currency risk.

Although the USD/JPY is likely to continue to outperform the yen, it is worth paying attention to interest rate trends in Japan. In particular, the 10-year treasury yield has risen since the beginning of the year. Speculation of higher JGB rates could spill over into the global bond market in the coming months.

Considering all these factors, it’s easy to see why the yen has weakened so much in the last few months. Even though the dollar has strengthened, the yen’s value remains at an all-time low. Therefore, the next few weeks will be important for the yen’s fortunes.

The key question to ask is whether the yen will reverse its trend and fall back to its previous levels. According to ING, it is possible, but only for a few years.

ING's long-term USD/JPY forecast

ING’s long-term USD/JPY forecast is for the yen to weaken against the Dollar in the next couple of years. This is because the US economy is on track to outpace Japan’s growth by 2021. That means the Japanese yen will be unable to provide as much
support as it did during the previous two years.

ING’s long-term USD/JPY outlook also takes into account the potential for the Bank of Japan to move away from its YCC policy, which has kept interest rates negative for a variety of reasons. Despite that, the Japanese authorities will still need to implement policies to keep the yen from gaining support.

The yen has been declining against the dollar since early in the year. With the US Federal Reserve raising its main interest rate, the Japanese currency has been dragged lower as well. Fortunately, the yen’s decline is expected to slow in the months to come. Still, there are plenty of reasons to be cautious about the Japanese currency.

For example, a sharp fall in equity markets could drag US yields downward. This could mean the USD/JPY pair loses substantial value. Likewise, a lack of confidence in the dollar may cause investors to seek out other investments. It is important to note that the USD/JPY pair’s short-term trading opportunities will depend on US bond yields, the Federal Reserve, and broader market risk sentiment. Additionally, it is also crucial to monitor Japanese interest rates.

The Bank of Japan has continued its monetary easing program this year, keeping its benchmark rate ultra-low. However, the MoF’s intervention in the market has had little impact on the yen’s downward trend. ING Economics expects the BoJ to continue its monetary easing efforts through 2023, but only if inflation is still below the 1% target set by the Fed.

Similarly, Goldman Sachs Group Inc. and Citiban