JPY: Westpac Look For Further Upside

Westpac note that "this week AUD/JPY reached highs since December 2018. The traditional risk barometer has traded a huge range of Y60 to Y83 over the past 12 months, with its recovery accelerating from around Y73 in October 2020. Yet USD/JPY has had a very low or even negative correlation with equity movements in recent months, meaning that AUD/JPY gains have really just been AUD/USD. The AUD/JPY recovery from pandemic lows is not yet a year old and should extend into 2022, backed by a coordinated global upswing supporting commodity demand. This should reinforce the rebound in Australia's domestic economy from a comparatively contained Covid situation, with GDP recovering its pandemic losses by June 2021. The surge in global bond yields should support AUD/JPY, given the BoJ's commitment to "around" 0% yield for the 10-year JGB. While the RBA's dedication to loose policy is very clear, steepening yield curves globally should help A$ on crosses. Multi-day/week risks look to be tilted towards Y84.50, with our year-end forecast Y87."