Bank of America Merrill Lynch FX Strategy Research discusses USD/JY outlook, arguing that mixed equity flows might have led to the recent decoupling in USD/JPY and the Nikkei 225 index (NKY) as the latter has clearly outperformed the former this year.
"…Under this circumstance, JPY's fundamental weakness would be manifested in cross-yen pairs rather than USD/JPY. However, we believe the dollar's strength will eventually recouple USD/JPY and NKY. A success in US tax reform may catalyze the move," BofAML argues.
"We expect USD/JPY to rise to 118 within the next three months," BofAML projects.
Source: Bank of America Merrill Lynch Rates and Currencies ResearchOriginal Article
