Westpac AUD/JPY Overview

Westpac write “JPY is easily the weakest G10 currency over the past 12 months as the BoJ made only minor policy tweaks.”

• “But the yen also often underperformed during periods of risk aversion, in contrast to fellow traditional haven currency the CHF.”
• “The yen may regain its sensitivity to global risk appetite but probably not until yield spreads between Japan and the rest of the G10 are less extreme. “
• “But with GDP contracting and inflation easing, there seems little chance of any BoJ policy change on 19 Mar.”
• “Instead, a majority of economists expect the 26 April meeting (to produce an end to both YCC and NIRP.”
• “With BoJ policy tweaks unlikely for another 2 months at least and the Fed leaning hawkish, USD/JPY is again high enough for the MoF to vaguely threaten FX intervention. Such warnings might slow the pace of yen decline but AUD/JPY is well within reach of fresh 9+ year highs in the 99-100 area.”
• “But we see limited upside for AUD/USD in coming weeks, with investor scepticism over China’s economy remaining a strong headwind for the Aussie and sluggish data reinforcing that the RBA’s next move will be an easing. Thus Mar-Apr could well be the year’s high for AUD/JPY, with our year-end forecast 96.”