CIBC look for the yen to continue strengthening against the dollar, citing:
- a good chunk of the JPY's move higher can be attributed to narrowing short-and-long rate spreads against UST
- This is supported by weekly MoF data indicating that the pace of outward foreign investment flows is still much less than it was before the crisis hit earlier this year
- For the real economy, the hope right now is that the Chinese economy will continue to recover, helping Japanese exports and easing pressure to do more on the fiscal front.
- Authorities have highlighted that government finances are in a tough spot and that it's unlikely that the sales tax will be cut
- The BoJ remains on autopilot, but are ready to act if yields drift higher.
- JPY should continue to take its cue from a weaker USD plus narrowing spreads for now
The analysts at bank are forecasting:
- 103 in Q4 2020
- 101 in Q1 2021
