UBS is out with its 2024 USDJPY forecast

The Bank of Japan (BoJ) recently maintained its accommodative monetary stance on Tuesday but indicated a growing inclination to phase out its extensive stimulus, hinting that an end to negative interest rates might be near.

BoJ Governor Kazuo Ueda didn't provide clear signals about pulling short-term interest rates from negative territory in the upcoming March or April meetings, though many economists anticipate such a move.

Ueda noted an increasing likelihood of Japan achieving the bank's 2% inflation target, citing recent steady increases in service sector prices.

Weighing in on the matter, UBS strategist Teck Leng Tan said this implies that the BoJ aims to prevent an uncontrolled increase in Japanese government bond (JGB) yields, even when announcing the elimination of its negative interest rate policy (NIRP) and/or the yield-curve control (YCC) policy.

“In this context, we believe the upside potential for the 10-year JGB yield is limited to around 1% (from the current level of around 0.66%),” the analyst wrote in the note.

Consequently, the predominant factor influencing the spread between US and Japan yields, and thereby the USDJPY exchange rate, is anticipated to be a consistent decrease in 10-year US yields.

UBS projects these yields to decline to approximately 3.5% by the end of the year, down from the current 4.11%.

“With our USDJPY year-end target of 140, we reiterate our preference to sell USDJPY upside risk for yield pick-up or sell USDJPY outright at levels of 148 and above,” Tan and his team wrote.

By Vahid Karaahmetovic

You May Also Be Interested In

• Stripe, Advent In Talks To Buy Paypal - WSJ
• Home Depot (HD) call put ratio 1.5 calls to 1 put with a focus on September 330 puts into quarter results
• Increasing unusual put volume: CAPR BW AEP NMAX KORU VCX SM YSS HWM MUU WDAY NU