From a Credit Suisse client note:
From a USD perspective the key development longer-term is the break to new multi-year highs around 125.00 seen in USDJPY, which has corresponded with fresh widening in US - Japan rate differentials. Many observers see the JPY as no longer expensive from a valuation perspective. And Japanese monetary policy shifts are not likely to be in play for many months yet as the Nikkei continues to rise and a soft JPY provides still more stimulus.
In this context,further USDJPY gains are likely to be a function of a) ongoing portfolio outflows from Japan and b) generalized USD strength stemming from higher US rates.
As these are both central features of our underlying view, we now upgrade our USDJPY forecasts to 128 in 3 months and 130 in 12 months from 122 and 127 previously.
We are frustrated that we missed the latest move higher from a trade recommendation perspective, having decided that other USD longs in our recommendations portfolio gave us sufficient exposure, a decision that was clearly a mistake in hindsight. Dips towards 123.00 should be seen as a buying opportunity, in our view."
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