Skip to Content
News & Analysis at your fingertips.

We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site. See our updated Privacy Policy here.

Free Trading Guides
Subscribe
Please try again
Select

Live Webinar Events

0

Economic Calendar Events

0

Notify me about

Live Webinar Events
Economic Calendar Events

H

High

M

Medium

L

Low
More View More
USD/JPY Range Vulnerable as Yen Leans on ’Funding-Currency’ Status

USD/JPY Range Vulnerable as Yen Leans on ’Funding-Currency’ Status

Fundamental Forecast for Yen:Neutral

The long-term outlook for USD/JPY remains bullish amid the deviating paths for monetary policy, but the range-bound price action in the exchange rate may unravel in the days ahead as market participants continue to treat the Japanese Yen as a ‘funding-currency.’

Even though the Fed remains ‘data dependent,’ the recent rhetoric from Chair Janet Yellen suggest that the committee remains on course to raise the benchmark in 2015 as the central bank head pledges to normalize policy in a ‘timely fashion.’ As a result, the key data prints coming out next week may boost expectations for a rate-hike later this year as the economic docket is anticipated to show faster wage/price growth accompanied by another 200K expansion in U.S. Non-Farm Payrolls (NFP). Indeed, signs of a stronger recovery may encourage a larger dissent at the Fed’s October 28 interest rate decision especially as the region approaches full-employment.

In contrast, a down tick in Japan’s Tankan surveys may put increased pressure on the Bank of Japan (BoJ) to further embark on its easing cycle as it undermines the central bank’s scope to achieve the 2% target for inflation over the policy horizon. With the BoJ scheduled to announce two separate interest rate decisions in October, the softening outlook for global growth accompanied by the ongoing weakness in oil prices may become a growing concern for the central bank, and a greater willingness to boost the qualitative/quantitative easing (QQE) program is likely to produce headwinds for the Japanese Yen amid the deviating paths for monetary policy.

Moreover, market sentiment may continue to play a key role in dictating price ahead of the key interest rate decisions as global investors treat the Japanese Yen as a ‘funding-currency,’ and shifts in risk trends may largely accompany turns in USD/JPY as market participants weigh the outlook for monetary policy. Until then, the near-term consolidation in the dollar-yen may persist going into the end of September as the pair largely retains the opening range from the beginning of the month.

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

DISCLOSURES