JPMorgan Warns USD/JPY May Fall to 142-146
On September 4, JPMorgan warned that if the USD/JPY falls below 155, approximately 16 trillion to 17 trillion yen, equivalent to about 102.6 billion USD, in outstanding yen shorts could be forced to cover, driving up the yen's value. Theoretically, the USD/JPY could fall to the 142-146 range. Recent price movements indicate that large-scale yen shorts may not have been fully cleared, and if the USD/JPY drops below 155, the risk of selling will increase, potentially leading to a stronger yen than the market expects. Currently, the USD/JPY touched 160.39 earlier this week before retreating to around 155.30, with the yen expected to rise about 2.7% against the dollar this week, marking its best performance since July. The yen's strength is driven by multiple factors, including rising market expectations for further interest rate hikes by the Bank of Japan, speculative short covering, and increased demand for currency hedging from domestic Japanese investors. The swap market has almost fully priced in a 25 basis point rate hike by the Bank of Japan this month, with an estimated 80% probability of another hike in December. JPMorgan believes that market expectations for adjustments in asset allocation by the Bank of Japan and GPIF may be excessive and does not see a significant probability of the USD/JPY falling below the 155-165 range. Meanwhile, Japan's top foreign exchange official, Jun Mimura, expressed dissatisfaction with the current yen trend, stating that Japan is prepared to continue responding to fluctuations in the currency market. Bank of America is inclined to short the USD/JPY with a target of 149, while TD Securities maintains a moderately bearish outlook on the dollar for the remainder of the year. The market is awaiting U.S. non-farm payroll data and next week's CPI data to assess the Federal Reserve's future policy path.
-- Price
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