BTMU FX Strategy Research notes that the JPY has weakened notably versus the USD in recent days mainly on rising US yields but perhaps also in part on the prospect of a PM Abe victory in a sooner than expected general election.
In that regard, BTMU maintains a cautious bias on USD/JPY here arguing that its recent bounce is only a temporary relief.
"We doubt the yen has much scope to weaken further. The FOMC rate hike in December is certainly finely balanced while a look at inflation expectations in Japan, which have declined steadily this year is a clear indication of the scepticism markets now hold over the ability of BoJ monetary policy to lift inflation. Real yields are set to remain relatively supportive for the yen going forward," BTMU argues.
Source: BTMU ResearchOriginal Article
