USD/JPY has stabilised – Danske Bank

USD/JPY has stabilised after yesterday’s sell-off triggered by the unexpected cut back in BoJ QE, suggests the research team at Danske Bank.

Key Quotes

“We maintain the view that the BoJ’s cutback of purchases is merely a reaction to the recent flattening of the super-long JGB yield curve and reckon that the somewhat excessive reaction in the FX market is a function of stretched positioning and stretched short term valuation. However, uncertainty is likely to remain high and could keep USD/JPY under pressure in the near term. Moreover, focus on BoJ’s personnel changes as Governor Haruhiko Kuroda’s current term ends in April could also weigh on the cross in coming weeks. We still target USD/JPY at 113 in 3M.”