USD/JPY: Yen weakness can remain for longer – MUFG

The biggest mover amongst G10 currencies at the start of this year has been the Japanese Yen (JPY). USD/JPY higher for longer? Economists at MUFG Bank analyze the pair’s outlook.

Carry-seeking market participants likely see value in long USD/JPY

The return to carry will help support USD/JPY.

The BoJ risk to that trade looks limited for now. The escalation of geopolitical risks could also help support USD/JPY.

Higher crude oil prices are a Yen negative while increased global inflation risks may leave the Fed a little reluctant to push a dovish narrative, at least over the short-term as inflation risks could be seen to be rising.