UBS note that "USD/JPY has remained in...>

DOLLAR-YEN: UBS note that "USD/JPY has remained in a relatively tight range

since the beginning of Aug, which may seem puzzling given the JPY's 'safe-haven'

status. Looking across asset classes, the risk rally that immediately followed

the announcement of U.S. trade tariffs limits the scope for JPY appreciation. In

a tail risk scenario where the impact of trade policy materially worsens the

global growth outlook, JPY strength would likely be limited by the broader 'Asia

effect', whereby upward pressure on $/Asia supports higher USD/JPY to some

extent. Any adjustments to BoJ policy next year are likely to keep real rates

accommodative, while the Fed's tightening path is already well-priced. Our

economists exp. a 25bp hike in the 10-Year yield target & a non-negative

short-term rate in Apr '19. On balance, the relatively minor tweaks from the Jul

meeting are not a meaningful deviation from ultra-easy policy. We exp. USD/JPY

to remain in a relatively tight range, settling at Y111 by end-'19. USD/JPY

could be vulnerable to a less hawkish Fed in Q4 but overall our view remains

broadly neutral. U.S. 10-Year yields are unlikely to move sustainably higher and

should not catalyse further USD/JPY upside."