Credit Suisse: Black Monday USDJPY trades

26 August,, Vilnius – Following the Black Monday USDJPY trades have devalued approximately 2% to the current levels. The Yen’s appreciation might spark further monetary policy actions from BoJ, resulting in JPY devaluation.

Therefore, the consensus expectations for USDJPY targets remain very high, points out Credit Suisse.

The major bank is not confident that the political attitude to use the Japanese Yen as a stimulating tool for ever is as powerful as the markets may be pricing in. Thus, it is consistent with the late deterioration in the Cabinet’s approval ratings, Suisse notes, which might be in part due to the negative implementations of JPY weakness on small and medium sized businesses.

"As such, baring a further sharp correction in USDJPY (towards 110.0), we think the government’s appetite for additional easing is limited. Indeed, our Japan economics team doesn’t expect the BoJ to decide on additional easing measures before year-end," CS argues.

However, at the same time, Credit Suisse suspects that the financial market will remain drawing a line under the Yen’s weakness eyeing the fact that the Bank of Japan (BoJ) has guaranteed abrupt inflation gains from the fort quarter of 2015 onward. Hence, possibly ending up with an egg on its face if it does not act once more, CS adds.

All in all, Credit Suisse believes that the scenario should sustain USDJPY at approximately 120 area over the medium term, even if it will not make new highs. The major bank targets USDJPY at 122 area in 3 months time and at 125 in the long run.

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