FXEMPIRE
All
Ad
Corona Virus
Stay Safe, FollowGuidance
World
96,009,720Confirmed
2,049,348Deaths
68,629,984Recovered
Fetching Location Data…
Advertisement
Advertisement
James Hyerczyk
USD/JPY

The Dollar/Yen finished the holiday-shortened week lower as investors continued to pressure the greenback in anticipation of an even further decline in 2021. The catalyst behind the selling is tied to the huge bet that the global economic recovery will pull money into riskier assets even as the U.S. has to borrow even more to fund its swelling twin deficits.

Last week, the USD/JPY settled at 103.305, down -0.195 or -0.19%.

Advertisement
Know where the Market is headed? Take advantage now with 

75% of retail CFD investors lose money

Deterioration in ‘Twin Deficits’ Should Favor Japanese Yen

According to Reuters, “The prospect of a brighter 2021 has lessened the need for a safe-haven dollar, while burnishing the attraction of riskier assets especially in emerging markets.”

“Bears have also resurrected the “twin deficits” excuse for shorting the dollar- that the explosion in the budget and trade deficits means more dollars being printed and moved abroad.”

“From this perspective the new U.S. stimulus bill is dollar negative as it adds to the nation’s debt, and President-elect Joe Biden is promising a lot more next year.”

“The country is also hemorrhaging dollars on its trade account where the deficit on goods hit a record $84.8 billion in November as imports surged past pre-pandemic levels.”

“Likewise, the current account deficit widened to a 12-year high in the third quarter and there was a large shortfall in net financial transactions as Americans borrowed more from abroad.”

Advertisement

Bloomberg:  Wall Street’s Call for Yen at 100 Catches On at Japan Banks

Earlier in the month, Bloomberg wrote, “Wall Street and Japan’s largest banks are starting to see eye to eye on the yen’s outlook, saying its advance could break the barrier of 100 per dollar this year.”

“JPMorgan Chase & Co., Goldman Sachs Group Inc and BNP Paribas SA are all forecasting that Japan’s currency will hit the century mark for the first time in four years in 2021. Rarer still, domestic giants Mizuho Bank Ltd. and MUFG Bank Ltd. are joining them, with estimates that the yen could even push to 98, a level unseen since 2013.”

“The perception gap has been in place for years,” said Hiroshi Yokotani, portfolio strategist for fixed income and currencies at State Street Global Advisors in Tokyo. “Compared to past years, more Japanese seem to forecast the dollar weakness and yen appreciation to progress a bit further next year.”

Weekly Forecast

Although there are key economic releases from the United States this week, the focus will be primarily on the two January 5 Georgia runoff races that will determine whether Democrats or Republicans control the U.S. Senate this year.

A Republican victory would mean they would hold a 52 seat Senate majority that would allow them to block some of President-elect Joe Biden’s agenda.

A Democrat Party win would give it 50 seats and the tie-breaking vote from Vice-President-elect Harris. This would give the Democrats control of the Senate after six-years of a GOP majority. This would likely mean that Biden would be able to pass most of his proposals that would include more stimulus.

Most traders agree that Democratic victory would likely widen the “twin deficits”, putting huge pressure on the U.S. Dollar.

For a look at all of today’s economic events, check out our economic calendar.
Don't miss a thing!
Discover what's moving the markets. Sign up for a daily update delivered to your inbox

Trade With A Regulated Broker

  • Your capital is at risk
IMPORTANT DISCLAIMERS
The content provided on the website includes general news and publications, our personal analysis and opinions, and contents provided by third parties, which are intended for educational and research purposes only. It does not constitute, and should not be read as, any recommendation or advice to take any action whatsoever, including to make any investment or buy any product. When making any financial decision, you should perform your own due diligence checks, apply your own discretion and consult your competent advisors. The content of the website is not personally directed to you, and we does not take into account your financial situation or needs.The information contained in this website is not necessarily provided in real-time nor is it necessarily accurate. Prices provided herein may be provided by market makers and not by exchanges.Any trading or other financial decision you make shall be at your full responsibility, and you must not rely on any information provided through the website. FX Empire does not provide any warranty regarding any of the information contained in the website, and shall bear no responsibility for any trading losses you might incur as a result of using any information contained in the website.The website may include advertisements and other promotional contents, and FX Empire may receive compensation from third parties in connection with the content. FX Empire does not endorse any third party or recommends using any third party's services, and does not assume responsibility for your use of any such third party's website or services.FX Empire and its employees, officers, subsidiaries and associates, are not liable nor shall they be held liable for any loss or damage resulting from your use of the website or reliance on the information provided on this website.
RISK DISCLAIMER
This website includes information about cryptocurrencies, contracts for difference (CFDs) and other financial instruments, and about brokers, exchanges and other entities trading in such instruments. Both cryptocurrencies and CFDs are complex instruments and come with a high risk of losing money. You should carefully consider whether you understand how these instruments work and whether you can afford to take the high risk of losing your money.FX Empire encourages you to perform your own research before making any investment decision, and to avoid investing in any financial instrument which you do not fully understand how it works and what are the risks involved.
FOLLOW US