Eastern Time on Thursday, Jane Foley, a high -level foreign exchange market strategist at Rabobank, said that the fundamental performance of the yen can be chaotic, but they can also be attributed to two main factors, namely the empty yen (due to Japan's low low (Japan’s low in Japan Interest rate environment) arbitrage transactions and good yen risks to avoid emotions (considering the risk aversion attribute of the yen).
core points
at the beginning of last year, the yen was supported in some worrying geopolitical events. These issues include attention to the South China Sea and concerns about North Korea. Over time, the situation has changed, but the situation in North Korea is still tense. However, in the last few months of last year, the yen seemed to be less sensitive to the news of the threat of Kim Jong Un. Although the US dollar began to rebound in September and pushed the US dollar/yen exchange rate higher, in the context of strong global economic growth, the attraction of yields would offset the impact of the inflow of risk aversion into the yen. In essence, strong growth seems to inhibit the market's response to geopolitical events. In view of the solid background of world economic growth at the beginning of this year,
can infer that the yen should continue to perform poorly. In the past month, the US dollar/yen exchange rate has little change, but the Japanese yen is indeed weaker than all other G10 currencies. North Korea reported this week that it will reopen the North -South communication lines and will hold high -level talks with South Korea next week, which shows that the geopolitical pressure of the region may be alleviated this year. This also implies the weak tone of the yen -although the geopolitical tensions in the Middle East or other regions may provide support. However, the weak prospect of the yen depends on whether it continues to play a role of a traded transaction financing currency. Conversely, this assumes that the Bank of Japan will maintain extremely loose monetary policy.
Kuroda Dongyan insisted on the Bank of Japan that the Bank of Japan must continue to implement a quantitative easing policy. Although Japan's current strong growth momentum is strong, the consumer price index (CPI) is still much lower than the goal of the Bank of Japan. According to Kuroda, "Japan's deflation mentality has not disappeared easily." Although Kuroda Dongyan's term will end in spring, he still has a good opportunity to continue the central bank. This means that the pigeon position of the bank may be maintained. The Bank of Japan and the Swiss Central Bank may become the only two central banks in this year who do not give up extremely loose policies. In view of this risk, we expect the yen to perform weak this year. We expect the euro/yen to go up 144 in the next 12 months, and the US dollar/yen looks at 116. However, we will pay close attention to the "reversal rate" of the Bank of Japan.
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Kuroda Hida mentioned the "reversal rate" in a November speech, which exacerbated the debate about whether the low yield will suppress the willingness of bank loans. At present, Kuroda Hittero guarantees that he is committed to monetary policy routes and Japan's low -consumption price index (CPI) inflation rate, which should keep the Bank of Japan's quantitative easing plan. However, Japan ’s serious labor shortage plus oil prices rising may stimulate this year's inflation expectations, which may evoke more hopeful hope of the Bank of Japan. Conversely, this may support universal concerns about QE side effects. The Bank of Japan has shown concerns about how its policy affects bank profitability and loan capacity. In September 2016, the bank adjusted the QQE plan, including the yield curve control. Since then, the bank has been committed to maintaining the 10 -year Treasury yield at zero level and preventing them from falling. Although Kuroda now seems to insist that there will be no policy changes, any complaint about changes may change the game rules of the yen.
