Focus FX Currency Forecast

21 Septembrie 2010

RAIFFEISEN BANK S.A.

 

EUR/JPY, USD/JPY

EUR/JPY: 111.8 - 110 (December)

USD/JPY: 85.4 - 92 (December)

Last week, the Bank of Japan (BoJ) intervened on the FX market and was thus able to end the appreciation trend for the Japanese yen for the time being. The intervention was well-timed, occurring on Wednesday, 2 am Central European Time. As there were no specific rumours about an intervention and no specific reasons for undertaking one, market participants are reserved about betting on any new interventions. Furthermore, the relatively low trading volume at the time of the intervention allowed the BoJ to have a major impact using a relatively limited amount of funds.

Consequently, the BoJ's intervention only distorted the market marginally. There are numerous rumours about the intervention, all of them unconfirmed. An intervention volume of around EUR 15 bn and a BoJ threshold of USD/JPY 82 have been speculated about, with the latter seen as possible trigger for further interventions. One thing is certain: the BoJ stepped into the market and did so with a relatively low volume of funds. The intervention last week will probably not be sufficient to weaken the yen over the longer term. During periods of high uncertainty (strong volatility for risk asset classes), the yen should continue to function as a safe haven for many Japanese investors. As Japanese economic growth in Q3 2010 is likely to come in at around zero per cent and worries about the economy are likely to become a topic of discussion again soon, we see more potential for the yen to appreciate, especially versus the euro.

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