UBS adjusts USD/JPY forecast for 2024

Analysts at UBS adjusted their USD/JPY forecast and introduced a target for March 2025 in a note this week.

The firm said the downtrend in the pair has been delayed by the economic resilience in the US. UBS noted the pair has seen significant moves in the past few months, falling from around 152 last November to nearly 140 in late December before rebounding quickly to around the 150 level currently.

"The year-to-date recovery has been driven by a strengthening USD (thanks to repricing of Federal Reserve rate cut expectations) and weaker-than-expected Japan GDP growth data that showed it falling into a technical recession in 3Q and 4Q 2023," they wrote.

However, they see the current USDJPY levels as "toppish" for reasons including market pricing for Fed rate cuts being sharply trimmed in the past month and weaker-than-expected Japan economic data having prompted markets to reverse their stance on a Bank of Japan policy normalization.

"From a timing perspective, a decline in the USDJPY exchange rate is expected to be more pronounced from mid-year onward, when the Fed signals its willingness to cut rates toward late 2Q, upon further confirmation of easing US growth and inflation," said UBS.

As a result, they have adjusted their USDJPY forecasts to 145 for June 2024 (up from 143), 142 for September 2024 (up from 141), and 140 for December 2024 (unchanged). The firm also introduced a 138 target for March 2025.

By Sam Boughedda

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