This summary is via the folks at eFX.

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ANZ anticipates limited near-term recovery for the JPY against the USD, with the currency pair expected to remain rangebound between 146 and 148.50. Factors such as higher US Treasury yields and the Federal Reserve's resistance to market expectations for rate cuts contribute to this outlook. However, shifts in anticipation of a Fed rate cut in the first half of 2024 could slightly tilt USD/JPY downward within the mentioned range. The upcoming March and April BoJ meetings are poised to be periods of heightened volatility and uncertainty for JPY crosses, irrespective of potential shifts towards ending negative rates and policy easing. ANZ predicts a year-end USD/JPY rate of 136, favouring JPY against CHF, EUR, and USD, contingent on the BOJ's policy adjustments later in the year.

Key Insights:

  • USD/JPY Rangebound: Current dynamics, including higher US Treasury yields and Fed's stance against early rate cuts, are expected to keep USD/JPY within a narrow range in the near term. • Fed Rate Cut Expectations: Market speculation about a potential Fed rate cut in early 2024 could influence USD/JPY, potentially pushing it slightly lower within the established range.
  • BoJ Meetings Impact: The March and April BoJ policy meetings are anticipated to induce significant volatility in JPY crosses, with the market closely watching for signals on ending negative rates and easing policies.
  • Year-End Forecast: ANZ projects the USD/JPY to reach 136 by the end of the year, recommending JPY positions against CHF, EUR, and USD in anticipation of BoJ policy shifts.

Conclusion: While near-term prospects for the JPY appear constrained by external factors and policy expectations in both the US and Japan, ANZ maintains a cautiously optimistic outlook for the currency later in the year. Key policy meetings by the BoJ and evolving market expectations for the Fed's rate path are critical to watch for potential impacts on JPY valuation and trading strategies.

anz boj usdyen chart 08 February 2024 2