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JPY winning the race to the bottom? - Rabobank

FXStreet (Barcelona) - Jane Foley, Senior Currency Strategist at Rabobank sees the huge amount of monetary stimulus currently been pursued by the BoJ, opening the central bank to accusations that it is deliberately following a policy to weaken the JPY.

Key Quotes

“The huge amount of monetary stimulus that is currently been pursued by the BoJ has opened the central bank to accusations that it is deliberately following a policy to weaken the JPY. This policy finds support in the fact that the fiscal position of the Japanese government is in such poor shape.”

“Insofar as Japan needs to import most of it energy resources, there have been some concerns about the impact of a weaker JPY on fuel bills of Japanese businesses, though weaker oil prices have since lessened these worries.”

“In response to these concerns, BoJ Kuroda in early September remarked that virtuous cycles in Japan’s economy wouldn’t be derailed by a weaker yen – this is about as candid that BoJ are likely to be with respect to commenting on the exchange rate.”

“In view of market expectations that the next move in Fed interest rates would be a hike, the BoJ’s recent announcement of more QE was well timed to push USD/JPY higher."

"While the disappointing performance of world growth made hinder the improvement in Japan’s external balance, given the country’s poor fiscal position hand we expect the BoJ to retain its ultra dovish position and look for USD/JPY to continue edging towards the Y120 area.”

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