The surging Japanese yen looks to remain strong in the near-term, inflicting further damage to the economy, although forecasters in a Reuters poll still think dollar/yen will edge back toward 100 later in the year.
Foreign exchange strategists look increasingly nervous, however, about their dogged calls for yen depreciation as dollar/yen extends its longest run below 100 since 1995. Indeed, the latest Reuters poll of 60 of them taken February 2-5 showed a median forecast of dollar/yen below 100 on the 12-month horizon for the first time, at 97, with a significant number of forecasters piling on sub-100 forecasts across the horizon.
An increasing number of strategists are looking for the Japa aversion is predominant, the JPY should continue to remain firm, although fears of BoJ intervention may prevent players from going heavily short below 89," said Roberto Mialich, strategist at UniCredit, the top forecaster in 2008.
Barclays' Sinha said that there was a risk of the authorities intervening to prop up the dollar, but that threshold was more likely in the range of 80-85 yen. He said any intervention would likely happen if the Nikkei fell sharply and re-tested its lows from last October along with an appreciation in the currency. The Nikkei closed at 7,949.65 on Thursday. "In general we think they're going to be more reluctant to intervene than they were in the past," Sinha said.
Cross rates calculated by Reuters show euro/yen at 115.0 in one month, 120.0 in six months and 125.2 in a year, compared with 123.7, 123.0 and 127.7 in the January poll. For the yen against the dollar, the poll suggested a volatility level of 12.3 percent, down from the 14.3 percent actual volatility seen last month.
Comments
Comments are closed.