📝Revising JPY Forecast On Potential BoJ Hike: Rabobank

Over the past week, the market has tied the value of the JPY with the perceived political fortunes of newly elected LDP leader Takaichi, and specifically with the concern that she would disrupt the BoJ’s rate hiking cycle.

The JPY is the weakest performing G10 currency over the past week. That said, we would be wary about carry trade bets in the coming weeks given the risk that the value of the JPY could snap back.

It is possible that Takaichi will not be able to gain enough support in parliament to win the role of PM. Even if Takaichi does become PM, there is a risk in assuming that she will want to be associated with a weak JPY policy or that the BoJ will not hike rates before year end.

While we have adjusted our 3-month USD/JPY forecast to take account of the broad-based improvement in the tone of the USD in recent weeks, we continue to look for a move lower in

USD/JPY. We now forecast a move to 147.00 (rather than 145) in 3 months. This assumes a BoJ rate hike before the turn of the year.-Rabobank