USD/JPY TO STEADILY DECLINE TOWARDS 135.00 ON A 12M HORIZON– DANSKE BANK
The recent rally in the Japanese Yen has reversed with USD/JPY trading nearly four figures higher than at year-end. Economists at Danske Bank analyze the pair’s outlook.
Strong year ahead for the JPY
We forecast USD/JPY to steadily decline towards 135.00 on a 12M horizon. This is primarily because we expect limited upside to US yields from here. Hence, we expect yield differentials to be a tailwind for the JPY during the year, as G10 central banks, except the BoJ, are likely to commence rate-cutting cycles.
In addition, historical data suggests that a global environment characterized by declining growth and inflation tends to favour the JPY.
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