Last week I posted from Goldman Sachs:
- the current market environment looks less favorable for significant dollar-yen downside
An update from GS now:
- over the past couple of weeks, the JPY has underperformed most other major currencies even as equities have sold-off, illustrating our empirical finding that USD/JPY typically rallies when U.S. real yields are rising, with the broader risk backdrop taking a back seat
GS mention a bullish factor for yen:
- speculation around a surprise policy adjustment at Governor Kuroda's last meeting in March has increased, despite Professor Ueda having so far suggested support for the current policy stance, including most recently at his testimony to the lower house
- such speculation combined with elevated recession concerns should keep any JPY underperformance somewhat limited
But GS is not convinced on yen strength:
- but we have repeatedly said that US real rates should matter most, and thus the current market environment looks less favorable for significant USD/JPY downside, even in the case of a hawkish BoJ policy shift
